Douwe Osinga's Blog: One to one marketing and unclear markets

Thursday, November 20, 2003

Naively one would expect the Internet to make markets much clearer and simpler. Everything is open and out there, right? Froogle and friends will dig any deal better than something else up before you can say 'market seperation.' But it won't lead to clear markets on the long run.

In normal markets, sellers are usually forced to sell their stuff for the same price to everybody. They don't like it much; it would be much nicer to extract more money from people that have more money or need the stuff more badly, but this sort of works on the bazar, but it doesn't in modern societies. It makes the whole buying process to costly.

Enters the Internet. If the e-commcerce people get their acts together and start to collect user data in earnest, they suddenly can offer different prices to different customers; The low-cost airlines Ryanair and Easyjet are already doing this in a way. Depending on when you want to fly and when you buy the ticket, the price you pay varies a lot. What if these companies would know much more about you?

In a market where consumers have complete knowledge, it is almost impossible for producers to make a profit. So they will do a lot to disturb this perfect knowledge that seems in reach due to the web. Amazon experimented for a while with charging different prices to different people. The public didn't like it and they had to change it back.

Amazon is the saviest e-retailer and they haven't given up. There is the golden box where you get special offers but you have to accept immediately and they're only for you, which is basically asking less money for stuff people don't really need. Similarily, Amazon offers a lot of combination deals, which also allow for market seperation.

By learning more and more about there customers, Amazon makes it possible to turn the global market place back into a kind of bazar, where the bazar salesman knows what his customer is willing to pay and does its best to get that price. This takes time and effort, but computer time is cheap. It does make life for consumers harder for they will have to hunt for bargains again.