Last Monday I wrote a post called Real Time Communications, describing how mass communications tools in the hands of average people are having a profound affect on our lives. At the end of the article, I posed a question about business implications of such access.
The difficulty with this question is manifested in the sheer magnitude of the problem. How does a company monitor mass communications channels, save the data, analyze it, and act upon what it finds? That’s when I ran into a simple and very understandable example.
For the past few months, I’ve observed how one company uses the real-time information of a competitor to set pricing. The company is Amazon.com, the competitor is Barnes and Noble, and the product is my book Read This First: The Executive’s Guide to New Media–From Blogs to Social Networks. The chart below demonstrates what I mean.
My book was released in November 2009. Since Amazon was the first bookstore to carry it, and thus had no competition, it chose the retail price of $17.95. That price held for a few weeks until it dropped suddenly to a seemingly arbitrary $12.21. It didn’t take me too long to figure out what had happened. Read This First had just debuted on Barnes and Noble’s site at that price.
Three months after the book was released, Barnes and Noble decided to increase its price to $15.34, triggering a corresponding and almost instantaneous increase on the Amazon side. But this time, instead of matching the price increase as it had earlier, Amazon only increased it by 10%, to $13.46.
Finally, about a week later, Amazon returned its price to $12.21 while Barnes and Noble has held its at $15.34 — where both prices remain today.
To me, this chart represents a simple example of how future businesses will use real time mass communication. Computer programs will watch for specific information, events, triggers, social graphs, etc… They’ll run that information through algorithms, perform pre-programmed actions, and closely monitor the results of those actions. Over time, the algorithms will be adjusted to optimize the results.
Perhaps companies will be able to better predict mass demand for a product. Perhaps they’ll be able to automate the purchase and sale of goods and services at an optimal price. Perhaps they’ll be able to predict large earthquakes, based on disparate and seemingly inconsequential data that on a whole paints an accurate picture.
I can’t predict what they’ll do with the information, but I can predict one thing with certainty: Technology is not the limiting factor…our imaginations are.
Photo Credit: Tolomea