Something fascinating happened during Black Friday.
It wasn't the mad hoards of people trampling one another for the latest electronic whiz-bang, and it wasn't the dreaded story of a major retailer's site going down, making them unable to capitalize on months of build-up, ad spends and hype (not to mention damage to the brand). We have entered a new era in marketing, and it's one where marketing and IT come together (and stop residing in their respective, vertical, ghettos within the organization). Gartner and others research firms are stating that marketing departments will soon be spending more on technology than the IT department. Innovations in the spaces of CRM, ERP, social medial, cloud-based solutions, mobile platforms and more may be driving this now, but looking out on to the horizon, newer technologies like context-based engines and more will escalate the ascent of both cost and infrastructure to the marketing department. The bigger, more pressing, issue is leveraging technology to optimize pricing.
A different price for different people at different moments.
On November 23rd, 2012, I blogged about the pending rise and increase in personalized pricing (you can read more about that here: The Future Of Personalized Pricing). Yesterday, The New York Times ran a news item titled, Retail Frenzy: Prices on the Web Change Hourly. From the article: "Retail price wars online have entered a new era of speed and precision, creating a confusing landscape for shoppers in which prices leap and plummet on short notice. In the old days, merchants sent employees into competitors' stores to check on pricing, and days later 'sale' signs reflected new markdowns. Now, sophisticated computer programs accomplish the same goal online within hours, and even minutes."
When pricing goes digital, it's hard to know what a fair price is.
If a price changes from moment to moment, quickly over time it's hard to know what the best price (or most reasonable price) ever was. Imagine if the price of a product was as volatile and fluctuating as the stock market. The New York Times piece goes on to say: "... in all, seven price changes in seven days. The unluckiest buyer paid more than triple the price that the luckiest buyer paid." You may think this isn't a big deal. You may think that anyone can simply hop on Twitter and ask others what they paid for a similar item, but with fluctuations and changes happening all of the time, it would become increasingly challenging to know any one "truth" about what the best price is.
It's happening on Wall Street. It's going to start happening to everything that you buy.
Personalized pricing is one thing, high-frequency pricing is another. During a session at Google Zeitgeist this past year in Phoenix, New York Times columnist and best-selling business book author, Andrew Ross Sorkin (Too Big To Fail), painted a harrowing financial picture when describing the prevalence of high-frequency trading in relation to the kind of trading that your average investment advisor or stock broker are providing. These high-frequency trading systems are the dominant force on Wall Street, using incredibly powerful computer algorithms that are making massive decisions in milliseconds with no human intervention. In short, you (and the best stock broker in the world) don't stand a chance against these super-computers when it comes to generating money. So, while the current crop of price adjustments online don't seem fair and just during the most wonderful time of the year, what do you think is going to happen when these high-frequency algorithmic technologies become that much more accessible to brands?
The speed of price.
In short, it means that the price of a product may become much more similar to snowflakes. Where no two snowflakes are alike, high-frequency pricing will mean that no two prices are alike... even for the same product. The art of retail could them devolve not into a world of dollars per square feet, but instead become a game of pricing optimizing in milliseconds. Some business leaders may still think that this is business as usual. When thinking about a world where high-frequency pricing is as predominant as high-frequency trading (again, without the assistance of any human intervention), you can't help but wonder what kind of world we will be living in within the next five years.
Excited? Scared? Creeped out? What do you think about high-frequency pricing?