Demand is not Just a Function of Price

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The only interesting part of my Feedburner stats that is interesting to me is the part that tells me how visitors landed on this page. Usually it’s through search, of course. I have two general reactions to the most frequent search terms:

1) I should write more about that; and
2) Why the hell are so many people shopping for reaction wheels? It’s a satellite part. Don’t you satellite builders have catalogs? Are there new suppliers popping up all the time that noone tells you about? I should do some reaction wheel lead-gen; I have to imagine they sell for top dollar.

Anyway, back to one. The most frequent searches in that category are ‘what does non-profit mean?’ and ‘why does MacMall suck so bad?’ or variations thereof. On the first, I keep planning to write more. The latter just makes me happy.

The time I ordered from MacMall and had such a horrible experience (to wit, their complete disavowal of any responsibility for shipping me a brick rather than a MacBook Pro) I blogged about it as revenge. Er, to alert the world to problems they may face when ordering from them.

I understand their difficulty. If you sell at a discount, you have to cut costs somewhere. But it seems to me that some things should not be cut, like selling working products.

I was thinking this today because of Amazon. I love Amazon. I probably do the bulk of my shopping on Amazon. I’ve been shopping at Amazon for thirteen years now and never had a bad experience.

Someone recommended “Competing with Analytics” to me the other day. I looked for it at Amazon and it was selling for $20 in hardcover. The link to “Other versions” showed a digital download for $7. So, naively believing that the promise of the digital world would save the rainforest while costing me less, I clicked on it and bought it. Naturally, it was a horribly overpriced five page summary that I bought, not a wonderfully underpriced version of the book.

Despite the fact that the summary purchase page was clearly labelled “Summary”, I fired off an email to Amazon, moaning about the “bait and switch.” Feeling better afterwards, I figured they’d send back a “dude, read the product page” and that would be it and I’d be out $7.

But, within 15 minutes, they had sent me an email apologizing and credited my account the $7.

Price isn’t everything. Price is almost always a misleading purchase factor, even when shopping for a shrink-wrapped, brand-name product. I think about this a lot in regards to the promise of the web to provide more efficient information to consumers re purchase. In online marketing, reducing the consumer demand function to a function of price alone always leads to system-gaming. This was especially evident in the lead-gen world. I can’t think of a single product where only price is the determining factor in purchase. (Price here meaning the dollar-out-of-pocket cost, not the ‘total’ cost.)

I think a lot about this because I think there’s a huge opportunity to create more efficiency in the process of matching consumers and products. And it’s a hard problem: determining a consumer’s utility calculation and matching it to offerings of various vendors and products along its most salient dimensions. Hard is good.