ABSTRACT
Thanks to Moore’s Law,1 marketers now have the ability to remember and respond to the
tastes and preferences of individual consumers. Advances in technology, and techniques
for database marketing, have created the opportunity for retailers to resurrect business
practices over 100-years-old. At that time, the local shop owner was able to develop
individual relationships with each customer, providing personalized service and product
recommendations. Peppers and Rogers (1993) explain it this way:
We are facing a paradigm shift of epic proportions-from the industrial era to
the Information Age. As a result, we are witnessing a meltdown of the
mass-marketing paradigm that has governed business competition throughout
the twentieth century. The new paradigm is one to one (1:1)—mandated by
cheaper and faster data management, interactive media, and increasing
capabilities for mass customization, (p. xiii)
While the idea of one to one marketing is no longer revolutionary, the effective
implementation of such systems in an online retail setting is still in its infancy. The leaders in the
field, such as Amazon.com and ActiveDecisions.com, continue to experiment with their
approach and refine their techniques, yet their execution remains awkward and is often
rudimentary. For example, Amazon.com found itself in hot water over the apparent
personalization of prices across different segments of consumers. According to USA
Today (2000), “Amazon has faced allegations-which it denies-that the varying prices
were based on customer data it obtained via software interactions with shoppers as they
visited its site. Because of the consumer outcry, Amazon ended up refunding 6,896
customers an average of $3”. While such dynamic pricing has been common place among
airline passengers for years, customers buying DVDs at Amazon were not willing to
accept different prices (whether they were randomly chosen, as Amazon claims, or based
on knowledge about the individual shoppers as some customers have claimed).
