The unintended consequences of dynamic pricing

and other news for digital executives, by journalist Mitch Betts ▸ What killed Walmart's Scan & Go? ▸ TIAA gets chatty ▸ Avoiding risky parking lots ▸ CxO career moves ▸

Newsletter by Mitch Betts © Ampersand Reports 2019, all rights reserved.

Study: Offering customers discounts to buy items stuck in their online shopping cart works great — until customers get wise to the scheme

A study by a team of researchers from Washington University in St. Louis and University of California, Los Angeles (UCLA) shows the practice of dynamic pricing can generate unintended consequences by changing the behavior of customers.

Retailers didn’t realize that offering different prices to different customers may backfire in the long run,” said Dennis Zhang, one of the paper’s authors.

In the paper titled “How Do Price Promotions Affect Customer Behavior on Retailing Platforms? Evidence from a Large Randomized Experiment on Alibaba,” accepted for publication in Management Science, the researchers focused on a promotional tool Chinese online retailer Alibaba Group uses to target customers who leave products languishing in their shopping carts.

Alibaba conducted an experiment on more than 100 million customers, targeting a random set of customers who had products untouched in their shopping carts with special price promotions. Other customers who met the same criteria received no promotions.

“In the short term, the dynamic pricing program worked like gangbusters,” according to a statement summarizing the study. “Products flew out of the Alibaba shopping carts as sales doubled on the promoted products.”

But it didn’t take long for customers to figure out what was happening — and turn into serious bargain-hunters. “You’re training the customers to be more strategic,” Zhang said. “They [start] spending more time looking for deals, even before they put something in their shopping cart.”

In fact, the longer-term results of dynamic pricing and special shopping cart promotions showed that customers were adding more products to their carts and hoping for a discount, thus jeopardizing revenue. Ultimately, the research results persuaded the company to pull the plug on shopping cart promotions.


WHO’S DOING WHAT

Real digital activity in corporate America

Grab & Go. A former Walmart Inc. executive said shopper theft was a major reason why the company killed Scan & Go, a cashierless-checkout technology, several months after expanding it to more than 100 stores. “You think that the theft is bad on self-checkouts? Wait until you try Scan & Go, where nobody is watching the customers out in the aisles,” said Joel Larson, who was Walmart’s head of checkout innovation until October. — Hayley Peterson, Business Insider

Ask TIAA. New York-based financial services firm TIAA launched new capabilities on digital assistant Amazon Alexa, enabling clients to ask about tax documents, find the closest TIAA advisor, or play a trivia game. Future features will include personalized account information, daily market briefings, and information about TIAA Bank accounts. Meanwhile, TIAA’s website offers a live chat function and a TIAA Virtual Assistant chatbot to answer about 400 of the most commonly asked questions about transfers, cash withdrawals, and loans.

Avoid risky parking lots. State Farm Mutual Automobile Insurance Co., in Bloomington, Ill., has patented a vehicle navigation & data system that identifies high-risk parking lots — those with above-average vehicle collisions and/or theft — and suggests re-routing to a low-risk one. (U.S. Patent No. 10,204,518)

Used-gear marketplace. Trimble Inc., a Sunnyvale, Calif.-based maker of navigation systems, launched Trimble Exchange, an e-commerce platform that connects Trimble’s dealers with construction & engineering companies seeking pre-owned, refurbished and legacy Trimble products.

Dudley Dobot. Fifth Third Bank, based in Cincinnati, released a free mobile app called Dobot that uses a personalized algorithm to automate savings based on user-defined financial goals & spending habits. “Dobot offers consumers a simple and fun way to reach their goals, whether that’s a spring break vacation or a down payment for a house,” said Doug Smith, director of consumer digital banking. Every few days, the app determines how much a customer can reasonably afford to put toward those goals, then automatically transfers small amounts of money from the customer’s checking account to a Dobot savings account. Fifth Third purchased the app from a fintech developer last year.

Personalized insurance. Nationwide Mutual Insurance Co., based in Columbus, Ohio, is launching SmartMiles, a telematics-based automobile insurance product for low-mileage drivers — e.g., people who work from home, carpool, or use public transit more than they drive — promising substantial savings. SmartMiles is available in Illinois, and will be rolled out to other states this year.


TRENDS & INNOVATIONS

Threat, opportunity, inspiration?

Disabilities act. Businesses with websites that can’t be navigated by the blind are getting pummeled with lawsuits. Federal disability litigation has accelerated dramatically in recent years, with some companies now getting hit by lawsuits for the second or third time. — Sara Randazzo, The Wall Street Journal

Populate the fields. Capital One Financial Corp. has developed a system that uses APIs to extract data from a third party to populate multiple fields of an online form on a mobile device, thus reducing manual data entry. (U.S. Patent Application No. 20190050380)

Vision-friendly. Innovega Inc. said it has developed technology that uses smart contact lenses to reduce the eyestrain associated with augmented reality (AR) and virtual reality (VR) displays.

Migration trends. Americans last year tended to move to Texas, Florida, and South Carolina, and migrated out of Illinois, Michigan, and California, according to data from U-Haul International Inc.

Shake the tag. IBM has developed a retail system that uses “smart tags,” which, when shaken by the shopper, retrieve and display the latest sale price for the tagged item. (U.S. Patent Application No. 20190050932)


PEOPLE

Talent, jobs, appointments, careers, transitions

Quest Diagnostics Inc., a Fortune 500 company based in Secaucus, N.J., hired Gabrielle Wolfson as SVP & Chief Information and Digital Officer, reporting to the CEO. She’ll be in charge of the company’s IT, digital healthcare products, data analytics, mobile app & portal, and “digital engagement” for the company's 2,200 patient service centers. Wolfson was previously CIO at Xerox Corp. (since 2016), and Wyndham Hotels and Resorts.

TCF Financial Corp., based in Minnesota, elected Theresa M. H. Wise to the company’s board of directors. She will serve on the technology, risk, and finance committees. She currently is CEO & Principal of Utaza LLC, a business advisory group focused on IT strategy, customer data analytics, mathematical models for inventory and revenue optimization. Previously, she was SVP & CIO at Delta Air Lines Inc., from 2008 to 2016.

Hearst Magazines in New York named Mike Smith to the newly created role of Chief Data Officer. He was previously COO of Hearst Magazines Digital Media. Before joining Hearst in in 2013, Smith was President of Forbes.com, Chief Digital Officer of Forbes Media, and CIO of TheStreet.com.

American Eagle Outfitters Inc., in Pittsburgh, appointed Deb Henretta to the company’s board of directors. She is an “executive advisor on digital transformation,” after a 30-year career at Procter & Gamble Co., where served as Group President of Global E-commerce.

Fishtech Group LLC, a cybersecurity company based in Kansas City, Mo., hired Kerry Kilker as EVP & Chief Information Security Officer (CISO). Kilker was previously SVP & CISO at Walmart Technology.

Cubic Corp., based in San Diego, announced the appointment of Kevin Eagan to the role of SVP & Chief Digital Officer, reporting to the CEO, effective March 25. He was previously Chief Digital Officer for IBM Global Services. (Cubic recently named Dan Hedstrom as VP & CIO for the company, which has 5,600 employees in 75 locations worldwide.)

Job openings:
  • Synovus Financial Corp. in Atlanta, is seeking a Chief Digital Officer.

  • Rivian Automotive LLC, an electric vehicle company (and Tesla rival) in Plymouth, Mich., is seeking a VP of IT (top IT position at the company). Compensation: Base salary of $225,000 to $250,000, plus a $50,000 annual bonus, plus stock options. — Bill Rogers, Executive Search Partners LLC

Catalina Marketing Corp., based in St. Petersburg, Fla., said it has emerged from Chapter 11 bankruptcy proceedings under new ownership, and hired Michael Bailey as CTO, reporting to the CEO. He previously held IT leadership positions at Diversified Foodservice Supply LLC, Sygen International, PeoplePC, and Staples Inc. Bailey joins Wes Chaar, Chief Data & Analytics Officer, in Catalina’s new C-suite.

Sleep technology startup Udisense Inc. (dba Nanit), New York-based creator of a “smart baby monitor and sleep tracker” for the nursery, appointed Sarah McCollum Dorsett as President. She was VP of E-commerce at Bed Bath & Beyond Inc.

Milton, Ga.-based Exide Technologies, a global maker of automotive and industrial batteries, named Brian Woodworth as SVP & CIO, reporting to the CEO.

FleetCor Technologies Inc., based in Georgia, appointed Scott duFour as Global CIO, reporting to the CEO. He was previously CIO for McKesson Europe. John Reed, FleetCor’s CIO since 2013, will be retiring from the position.

Pacific Architects and Engineers Inc. (PAE), a federal government contractor based in Arlington, Va., appointed James Benton as CIO. He had been serving as interim CIO since August 2018. He joined PAE in 2015 as CISO.

GoDaddy Inc. announced the retirement of CIO Arne Josefsberg, effective June 30, and will unify its technology organization under current CTO Charles Beadnall.

Zendesk Inc., in San Francisco, named Silicon Valley IT executive Colleen Berube as CIO.

Live! Casino & Hotel, based in Hanover, Md., hired Anthony Gustafson as CIO. He was previously CIO at Grand Victoria Casino in Elgin, Ill.

Dallas-based Tricolor Group LLC, which sells cars in the Hispanic market, appointed Don Goin as CTO, to lead the company’s digital transformation. He was previously a CIO at Santander Consumer USA and Capital One Auto Finance.

Enfusion Ltd. LLC, based in Chicago, named Wiktor Mikos its CIO.

Deanna Wise was named CIO at Banner Health, in Phoenix, Ariz.

Merchants Insurance Group, in Buffalo, N.Y., promoted Stephen Cross to VP & CIO.