When is “the best price” for customers not “the best price” for customers?

Posted on March 1, 2011 by Ian Betteridge
OAKLAND, CA - JANUARY 08: A Wal-Mart customer...

Image by Getty Images via @daylife

The Sage Gruber’s contortions to position Apple’s subscription pricing scam as “good for consumers” are getting so wild that he’ll be a high-level yoga master before you know it:

“Why not allow developers and publishers to set their own prices for in-app subscriptions? One reason: Apple wants its customers to get the best price — and, to know that they’re getting the best price whenever they buy a subscription through an app. It’s a confidence in the brand thing: with Apple’s rules, users know they’re getting the best price, they know they’ll be able to unsubscribe easily, and they know their privacy is protected… So the same-price rule is good for the user, and good for Apple”

John’s being obtuse here. How would a publisher offering a lower price than that offered through Apple’s store be bad for customers? It wouldn’t – it would be bad for Apple. Customers could choose to vote with their wallets – take the lower price on offer elsewhere, or take the convenience and privacy advantages of using in-app purchasing.

By the same logic, any large retailer could use its position in the market to force suppliers not to allow anyone to undercut it, and claim that it was simply ensuring “its customers got the best price”. I’m sure Wal-Mart would love its customers to “know that they’re getting the best price” by contractually obliging people not to sell their products for less elsewhere. Nothing to do with hobbling the competition, oh no sir.

As I’ve said before, Apple’s subscription offering is a mess. It offers publishers little value compared to what developers get, and it’s not good for consumers because it effectively stifles competition. No amount of juggling semantics by talking about “Apple’s customers” – like they own them – will change that.

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  • Anonymous

    As a matter of fact, Wal-Mart does demand best price from suppliers (it can’t prevent competitors from taking a loss, but generally it gets the best wholesale price.), Amazon too.

    Amazon does not even allow some authors to set their own price (it’s introduced as Kindle Singles while demanding 30% nonetheless + delivery fee), new Amazon android app market has a similar rule.

  • http://www.technovia.co.uk Ian Betteridge

    Wholesale pricing is not the same as retail pricing. Wal-Mart can (and does) demand that suppliers sell to it at prices lower than (or the same as) any other retailer. But they can’t demand that the supplier doesn’t sell its own goods, direct retail, at a lower price.

    In other words: You can demand any price you like wholesale. But you cant fix retail prices. Saying that no one else can sell at a lower price to customers no matter what the wholesale price is bad for consumers.

  • http://luo.ma TJ Luoma

    I was having a quick chat on Twitter with GlennF about Amazon requiring an Amazon Single to be free on Amazon if it was free on their website.

    I think it *is* good for the consumer to know that they’re getting the best available price. Otherwise, it undercuts “purchasing confidence.”

    What I mean by that is that for years I would go and buy software through the developer’s website, only to later learn that it was often the *worst* place to buy it. Here I mean things like Microsoft Office or Adobe Acrobat, not indie apps.

    This never made any sense to me. If I am buying “direct” why am I not getting the best price?

    (I’ll often see this with apps which are on sale at MUPromo.com. If you visit the developer’s site, there’s almost always no mention of the sale price, even though the sales are usually only for 24 hours. If I bought your app from your site the same day you were selling it for 50% off somewhere else, I’d be pissed at you and your app.)

    I’m not convinced that it’s better for the customer to have to hunt around for a better price. It’s more likely to make people think “Well, I want to buy X but I should check around for a better price” which they then forget to do.

    I don’t have any particular desire to support either Amazon or Apple, but honestly I don’t see how it’s better for me, as a customer, to have to wonder if this is the best price available.

    As for:

    http://www.technovia.co.uk/2011/02/this-is-why-apples-subscription-system-fails-for-consumers.html

    What stops the Economist iOS app from asking for login information to their website, and then providing you with content that you wouldn’t otherwise have? That’s what both Logos and Accordance do with their iOS apps.

    I’m still not convinced this is bad for customers. I’m willing to listen to see where I might be wrong, but so far it sounds like Apple and Amazon are doing their best to ensure high “purchasing confidence” (a term I will readily admit to having just made up, but hopefully you get the idea).

  • http://www.technovia.co.uk Ian Betteridge

    “I think it *is* good for the consumer to know that they’re getting the best available price. Otherwise, it undercuts “purchasing confidence.”"

    Take that argument to its logical conclusion and it would be “good” for the consumer if retailers just got together and fixed the price as the same everywhere – after all, then you get perfect “purchasing confidence”.

    Over here, we have a store which advertises as being “never knowingly undersold”. You buy from them, and if you find the same goods cheaper elsewhere in a set time frame, they’ll refund the difference, taking a hit on their profit if required. That’s real purchasing confidence. Contractually fixing the price so that no one else can under-sell you isn’t – it’s simply abusing your power as a dominant retailer in order to get a competitive advantage.

    Markets are about customers being able to shop around to get the best price, not one retailer fixing things so they alway have the best price. That’s not a free market – and if you believe that free markets benefit consumers in the long term, that’s a bad thing.

    “I’m not convinced that it’s better for the customer to have to hunt around for a better price. It’s more likely to make people think “Well, I want to buy X but I should check around for a better price” which they then forget to do.”

    To which I’d say: Tough. If you can’t be bothered to shop around, you shouldn’t expect to always get the best price.

    A more lengthy answer: I buy huge amounts of stuff from Amazon. I do so not because I always get the best price – I know I don’t – but because I value the convenience of having it delivered reliably to my door, by a vendor I trust, which has (in my direct experience) good customer service. The additional monetary price I pay sometimes is worth it for those factors.

    The same is true of Apple’s own iTunes store. I know damn well I could get MP3′s cheaper elsewhere (including on Amazon). But the discovery aspect of iTunes, coupled with the convenience of buying, makes it worth the extra money. Same again for buying from Apple’s physical stores – I could get stuff cheaper, but it’s a nice shopping experience, I like the customer service, and so on.

    And if the subscription system of in-app purchasing offers me the same level of convenience, security, and so on, wouldn’t it be worth me paying *more* for a subscription through it? If I value the privacy aspects of not giving a publisher my details, isn’t that worth me paying extra for? And, most important of all – shouldn’t that be something that I as a consumer can choose to pay more or less for?

    Trading competition for fixed prices just doesn’t sound like a good idea to me.

  • http://www.technovia.co.uk Ian Betteridge

    (My reply crossed with your edit, so I’ll add this bit separately!)

    “Why can’t everyone just have the same price? Why is it preferable to have some people pay a higher price?”

    Well thats a pretty philosophical question for this time of night.. :)

    It’s not preferable for anyone to pay a higher price. But fixing prices prevents *anyone* finding a lower price, and it’s competition between retailers which drive prices down overall. History proves that when you have situations where price competition isn’t allowed, prices stay artificially high – and that never benefits consumers. Only when retailers are allowed (and encouraged) to enter into free and fair competition do consumers benefit from lower prices over the long term.

  • http://twitter.com/dsmith8 Doug Smith

    In that same section, Gruber references a post by Matt Drance suggesting Apple waive the “same price” rule. Gruber goes on to say, “And I agree with him. Yes, same-price rule is good for users and for Apple, but waiving this rule wouldn’t be particularly bad for users or for Apple, either — and it would give publishers some freedom to experiment.”

    It doesn’t look like the “yoga master” is that wild about the best price requirement.

  • http://twitter.com/dsmith8 Doug Smith

    In that same section, Gruber references a post by Matt Drance suggesting Apple waive the “same price” rule. Gruber goes on to say, “And I agree with him. Yes, same-price rule is good for users and for Apple, but waiving this rule wouldn’t be particularly bad for users or for Apple, either — and it would give publishers some freedom to experiment.”

    It doesn’t look like the “yoga master” is that wild about the best price requirement.

  • http://www.technovia.co.uk Ian Betteridge

    No, but the quibble I have with him – and the meme which is sadly being picked up by far too many smart people – is that it’s somehow “good for users”. And note how he phrases that caveat: that it wouldn’t be “*really* bad”, which implies it might be a little bad.

    It’s not. It really, really isn’t good for customers that one company is able to fix the price that other people sell goods at. This is one of those “give them an inch and they’ll take a mile” points.