Amazon Refunding The Overcharge Experiment

MDMurphy writes "Got this in the email just now. Despite reports I'd read that you had to write Amazon and ask for a refund if you saw they charged others a lower price, it seems they are letting their customers know proactively: Greetings from Amazon.com. Thank you for your recent purchase from our DVD store. As you may be aware, we occasionally test various aspects of our web site--design, layout, and other features--for brief periods to determine how they resonate with customers. Recently, we tested the discounts we offered on selected DVDs, so that different discounts for certain titles appeared to individual customers chosen at random. Because you placed an order for the DVD "The Big Blue - Director's Cut" during this period, we wanted to let you know that we will be refunding the difference between the price you paid and the lowest test price that we offered on that DVD during the test period, in your case, $1.49. We also wanted you to know that if we conduct any price tests in the future, all customers who order items affected by these tests will automatically be refunded any price difference at the conclusion of the test, thereby ensuring that they will pay the lowest available price. We value your business and appreciate the trust you have placed in us by being a customer. Thank you for shopping at Amazon.com." You can see another news report about the havoc the "experiment" has played on things.

Re:Zappa's Law: What Else Is there?

Zappa's Law (as relayed by StoryMan, who admits he may have gotten it wrong) may be cute, but it will get you into some serious trouble if you actually believe it in some consequential context. Let me give two pertinent examples.

It's true that with respect to dying on a given flight, there are two major outcomes: dying and not. However, those two outcomes don't come in even proportions -- they aren't 50-50. If people from my country always fly on 50-50 Air, and people from your country fly on 99.99999-.00001 Air (both pretty shoddy organizations), then after a short period of time my country will be depopulated, while yours will thriving (but perhaps a bit nervous).

Now let's look at two online booksellers. 50-50 books figures either a book sells or it doesn't. PriceSetter Books is interested in the factors that contribute to the probability of a sale. PriceSetter figures out it can double it's sales of "Lucky Numbers" by changing the price from $13 to $12.95, and at the same time sell the same number of copies of "Worthless at Any Price" at $15 as it did at $12. 50-50 figures no matter what the price is, there are still exactly two outcomes, and just charges whatever they think is a good price. In both cases, a given consumer either buys the book or doesn't. But PriceSetter will earn more money, because they know that when you're talking about a million customers, there is a huge difference between 3% and 3.1%. And neither is all that close to 50-50.

Nobody really expects that booksellers won't try to maximize their profits by setting prices appropriately, whether profit is maximized in the short term, long term, or whatever (selling a book at a loss could maximize profits in some cases, I'm sure). But obviously in this case, people aren't happy with how Amazon went about it. I'm not so happy about it either, for many of the reasons listed in this thread.

Anyway, relevant to your message, I think we're stuck with the ad men and marketing slimeballs, because even if they're completely incompetent and come up with the wrong answers (price testing increases profits by .02%, but puts your company out of business when it gets posted on slashdot), it's nonetheless true that price shenanigans, heavy graphics, and all the stuff you and i may hate, have some connection with profits, and it's going to be hard to convince Amazon to stop trying to figure out what that connection is.

Not fair?

Am I the only person that doesn't see a real problem with what Amazon did? Okay, yes, giving something to someone for a lower price than someone else for no good reason is bad, slightly unethical, but look at it this way...

When I shop for something online, I spend at least an hour looking for the best price. I check at least 5 sites, a couple of auction sites, not to mention that big blue covered thing called the Real World, and when I find the best price, I take it. Assuming Amazon gives the lowest price, who cares if someone else got an item for less than you? Welcome to Consumerism 101, it happens. Somebody mentioned airline tickets the other day, perfect example. You could have paid half what the person sitting next to you paid, you could have also paid double. Shop around first!

"If they were doing research, that's something that costs money," he said. "They can't expect to do research for free all the time."

It's their system, if you don't like it, don't use it. As much as I disapprove of recent Amazon actions, it's still their right to tweak their own system.

--trb

Of course it's a conspiracy...

It's on Slashdot isn't it? It HAS to be a conspiracy!

They keep the interest

Amazon still profits from this venture because they are keeping the interest they made on the surcharge. If they invest at 6%, then keeping that extra $1.49 for two months means they made 1.49 cents. That doesn't sound like much, but multiple it by the tens of thousands of customers, and we're talking thousands of dollars.

Not only that, but will they be applying a refund to the credit card, or just giving you store credit? If the latter, then they make even more money on interest, and they don't have to pay any fines to the credit card company (if you make too many refunds, most credit card companies will charge you a fine).
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Re:Zappa's Law: What Else Is there?

You are obviously not a math guy. Probability is important: it is not as dangerous to fly on a commercial airplane, or say, bungee-jump out of a baloon with the bungee on fire. The probability is not 50-50 on both incidents. But, by all means, prove me wrong. Back to Amazon: wake the hell up! retailers have coupons, promos, catalogs, a bazillion things customized to give different prices to different people so they can sell as much as they can at the highest margin that they can get. It's not a swindle by some "Microsoft drones", its called, you guessed it: Capitalism. Live with it or get out of the way. And what the fuck is up with the "Microsoft drones" quote? does any rip on Microsoft get a 5, Insightful on /.? What on earth does this thread have to do with MS? I mean Amazon uses Perl, AFAIK, not ASP... Do you feel the need to attack MS to look /.-cool? is that the quality of post we are moderating up these days? sheesh...

Re:Not fair?

Yup, the point I was trying to make was that what they are doing is not any different to the car salesman....... none of us like to see people taken for a free ride.

We cannot object to the concept on principle, but this is a topic for Slashdot discussion because we should be trying to see if there are any ways they could be using which are not or should not be legal. If they are only gathering your info from their site I don't believe anyone can have a problem with that. If they are matching this up with data from other sources (e.g. doubleclick as mentioned) to track you all over the place because you are one of their customers that is equivalent to hiring a PI to follow you to see how you drive cars and which of your friends cars you look at and how much money you have and ..... you get the idea it is illegal.

Just because it is digital and/or online should not change the legailty of an issue, the difficulty is in coming up with suitable paradigms for these new online techniques in the real world whose law should apply.

I don't want anything for free except my Freedom, I just feel that whether legal or not we should all draw attention to the immoral business acts (such as patenting the one-click shopping IMHO) of any company so that we can vote with our wallets, hits and feet rather than be dragged along in the blind.

I don't know if Amazon are doing anything immoral here, but I think it more likely for someone here to know (or figure out) what they are doing than in any other forum.

conflicting answers from amazon?

In the recent Slashback [slashdot.org] Amazon.com said something totally different:

jeko writes "Amazon.com just sent me an email claiming that their different prices for different customers are merely a mistake."

He cites email from a customer rep at Amazon:

"Finally, at any given time, despite our best efforts, a small number of the more than 4.7 million items on our site may be mispriced. Kristine Jorgensen, Amazon.com"

So which was it... a mistake or an experiment?

Josh

Glad they did this

My god, if retailers kept abusing their power to price things differently for different individuals, congress might have to enact a 'fair pricing' law. Heaven forfend.

What the hell is with people that think pricing should be 'fair'? Who the hell ever guaranteed that everyone should pay the same price for the same goods? Is that in the consitution somewhere?

Is it unfair that I have to pay more for gas in the city than out in the countryside? Is it unfair that I have to pay more for a plane ticket than the guy who reserved weeks in advance?

Amazon displayed the purchase price and every single one of the people that are now getting a 'refund', agreed to pay the price Amazon quoted. I don't get it, refund of what? If you paid the price both you and the seller agreed upon how can there be a refund?

-josh

Re:PR exercise?

Perhaps *I* am cynical, but why the hell is this thread titled "Amazon Refunding the *Overcharge* Experiment"? Amazon is clearly not trying to rip some people off, they are giving a *discount* to some people who would otherwise not buy from them.

What the hell is wrong with that? it's called bargaining (as in what happens in a bazaar, you know the thing that's much better than a cathedral?) and it's SOP in 80% of the world.

Amazon has done some stupid stuff, but they are not by any stretch of the imagination some big evil corporation out to assimilate the world, and I am sick and tired of the anti-Amazon bias of the stories posted here.

I am also considering buying exclusively from them from now on, just because I know I have a *chance* of being offered a discount. Because I am *that* cheap. I use Napster too.

Re:PR exercise?

Since they said they might do the exact same thing in the future (random prices followed by refunds), it might be that they view the 2-step thing as a legitimate way to find the best spot on the price elasticity curve.

If that's true, then it doesn't seem to me that they were caught with their shorts down.

But maybe they planned to have their shorts down as long as possible, planning to pull them up as soon as enough people noticed.
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Re:I hate to say it

This happens all the time, in all markets. Take for example your favorite fast food chain. Let's make it Taco Bell for the sake of my example. Suppose your neighborhood T.B. sells their tacos at 79 cents each. Go to the movies and go eat some Taco Bell there, you'll pay at least 99 cents each, a 20% increase for the exact same product (although often inferior because they're in such a damned rush).

Let's take another example : Let's say you buy a shitload of computer gear like I do, and you almost always stick with the same shop for whatever reasons. Let's say you want to buy a GeForce2 with all the fixin's , that retails at maybe 569$ (in case you're about to have a seizure, those are canadian dollars). Well since you're such a loyal customer the shopkeeper might let you have it for 529$ at 40 bucks off since you've probably brought him 20k worth of business in the past 3 months. This is perfectly legal and happens every day.

So in conclusion, this is another case where everybody bitches when they're on the short end of the straw, without realizing that the situation is often reversed.

Re:Arrrgh!

You know, I bought a car a while back and then found out that some people got better prices than what was marked on the sticker because they took the time to bargain with the car dealer! And at a flea market last week I bought a book for $3, only to find out that people were buying two for $5! What a rip-off! And I could throw in some things about how the internet is a bit like a bazaar, but I hear prices aren't always fixed at those things either!

C'mon people -- why is anyone getting all worked up over this thing? Amazon is not ripping people off -- they're running a business. Searching around on the Amazon might have found you a better price, but everyone who paid the higher price agreed to that price -- no harm no foul. Maybe some customers are gonna be a bit upset at not having gotten the best deal, but that doesn't make Amazon "bastards" and "crooks"...

So why don't they just....

Raise the price of *everything* by three cents? I doubt that it's enough to drive customers away, but they could make tens of thousands of dollars more without the unpleasant publicity.

I can't wait to see the Slashdot headlines: "Your Rights Online: Amazon Scamming People out of Three Cents."

Zappa's Law: What Else Is there?

Maybe I'm not "getting" it, but why would Amazon conduct this sort of test in the first place?

If I were a retailer -- especially a big one like Amazon -- the only "testing" I'd do would be something along the lines of the Frank Zappa test: either you're dead or not. (Or, in the case, of Amazon: either we have the lowest price or we don't, period)

Zappa once joked (and I'm paraphrasing badly here -- if someone knows the complete context or quote, I'd appreciate it) that all the "probability" testing for crashing in an airplane or getting in accident or falling off a building is fucking absurd: the only real test for "survival" is a 50-50 chance: either you walk out the door and die, or you walk out the door and live. It's pretty simple.

I'm not a math guy, but I think about Zappa's Law lot -- especially these days when everybody is citing statistics about the chances they'll lose money, the chances they'll go out of business, the chances Napster will cut their business by X% -- whatever.

The only thing Amazon is doing by conducting the tests -- and, yes, even by refuding the money in an *enormous* gesture of goodwill and humanitarian appreciation (this is sarcasm, for those so impaired) is saying: look, we're not offering the lowest price, we're offering a *price* -- and with our price, you can take it or leave.

As a competing business -- B&N, whatever -- I'd jump on this and say, "Look, we won't fuck around with your head or your pocketbook. We'll give you the lowest price. No games, etc. etc."

To me, that'll earn my business. I don't care about personalization (contrary to what Microsoft says I *should* care about), I don't care about targetted e-mail, targetted advertising (contrary to what *sigh* even my beloved TIVO thinks) I care about the lowest price.

How come none of these places are asking me, Joe Consumer, what really matters? How come they think that if they send me advertising "targetted" to my demographic that I'm gonna think, gee whiz, thanks for the e-mail! I'll get right on your site and buy something?

How come they don't think: okay, consumers are savvy, let's not muck around with all this personalization stuff, let's just give them the goods, give it to them cheap, and make it easy to return if they don't like it.

These fucking ad men (and women) are Microsoft drones. They'll buy the latest commerce site server and think they're doing everybody a favor.

Well fuck that. They don't do *everybody* a favor because I'm someone and I don't give a shit about all this stuff. I just want the lowest prices. I don't need a "web experience". I don't need videos and snazzy graphics. I want low prices.

Talk to me, you ad men and women. Talk to me, you market testers.

I'll tell you want I want, and what (I'd bet) a good chunk of consumers want. I don't want frills, I don't want flash (Macromedia -- or the more general kind) -- all I want is a little savings of both time and money.

That will make me smile. That will make me happy. And that will keep me coming back.

Translated to English...

Dear potential Class Action Lawsuit participant,

Thank you for your recent purchase. As you are aware, our Market-droids recently came up a plan for ripping-off our customers without them being aware of it. As we are desperately out of touch with public opinion, and woefully ignorant of illegal trading practices, we decided to implement their plan. Unfortunately someone spotted this and we're now in some really deep shit.

In an effort to place some spin on this situation, we're refunding the money that we ripped you off for. Not only that, but we promise that if you notice us ripping you off in the future, we'll refund that money too.

We value your business and appreciate your trust; after all, without your complete and total trust we'd never have a hope of pulling off anything as underhanded as this. We hope that you will continue shopping with us. Really. We need your business, 'cos we're hemorrhaging cash faster than we can possibly hope to sustain and sooner or later our Venture Capitalists are going to notice.

Hugs and kisses, Amazon.con

P.S. You're not using any '1-Click' technology in any of your software, are you?

--

Encouraging Us to Gamble?

One line out of the Amazon [amazon.com] letter bothers me:

We also wanted you to know that if we conduct any price tests in the future, all customers who order items affected by these tests will automatically be refunded any price difference at the conclusion of the test, thereby ensuring that they will pay the lowest available price.

Are they encouraging us to gamble? Picture this: a DVD you really want is going for $30. If you thing there's a chance they may offer it to someone else for $25, that means you're gambling on a $5 refund somewhere. So maybe this is a way of luring people into paying full price on certain items in the hopes Amazon will adjust the price down and give you some money back.

Okay, conspiracies abound. But I know that if an online business came out and said "one out of every hundred purchasers will randomly receive a five dollar credit towards their next purchase," the gubment would go nuts.

--

PR exercise?

Perhaps I'm just cynical, but isn't this just a nice PR exercise by Amazon, along the lines of, "Oh hell, they spotted us, if we give them back their cash, perhaps they'll say we're still OK people, except for that one-click thing, anyway".

*shrug*

It could, of course, be completely genuine.

I noticed that Amazon.co.uk had reduced the price of an item that I'd pre-ordered, and emailed asking them to reflect the price change in my order, which they have done.

I wonder...

...if this was actually an 'experiment', or if they thought they could get away with it? With all the bad press they recieved over this, I would assume the later.

Dear Amazon Customer

Dear Amazon Customer:

Not only were we stupid to do the price adjustments, we're really sorry about patenting the mouse click. We were just kidding about that one. As soon as we run out of vulture capital, we will close our doors, shutdown our website, and donate the patent on the mouse click to the FSF.

Sincerly,

Jeff Bezos
--
then it comes to be that the soothing light at the end of your tunnel is just a freight train coming your way

To hell with apologies!

Jeeze, here in Michigan, if you buy something which scans different from what the price tag says, you get 10 times teh differences up to five bucks.

Perhaps the Michigan Attorney General should be looking into this.

Dave

Why?

People agreed to buy an item at a price. Why should Amazon apologize? I don't have to give the same price to everyone on items I sell. I think it's very admirable what they are doing by refunding the difference.

Amazon's other fumbles

According to the Register, Amazon has had some other problems with pricing as well...seems they offered DVDs at one price and then refused to sell unless the customer paid a higher price.
Even worse, they have absolved themselves from all responsibility for a customer's privacy.
See http://www.theregister.co.uk/content/1/13210.html for details.