Amazon apologizes for price-testing program that angered customers

Online retailer Amazon.com Inc. yesterday issued an apology to customers for a recent price-testing program that charged some users of its Web site more than other shoppers had to pay for the same products.

Seattle-based Amazon already announced earlier this month that it had changed its testing policy and would refund money to the shoppers who paid higher prices on some of the DVDs it sells (see story). Yesterday, the company contritely said the price testing "in retrospect . . . was a mistake [that] created uncertainty and complexity for our customers."

However, as part of its apology, Amazon denied claims that the different prices charged during the DVD test were based on demographic information collected from customers. The company said price levels were varied "on a totally random basis" in an attempt to determine how sales would be affected by lower prices.

"We've never tested and we never will test prices based on customer demographics," said Amazon.com CEO Jeff Bezos in a statement. "What we did was a random price test, and even that was a mistake because it created uncertainty for customers rather than simplifying their lives. The policy we put in place two weeks ago removes that uncertainty."

Amazon developed the new policy after being bombarded with complaints from customers about the DVD price-testing program. The company doesn't plan to stop doing such tests, but it said that all customers will automatically be charged the lowest price even if they agree to buy a product for a higher amount.

Harry Wolhandler, an analyst at ActivMedia Research LLC in Peterborough, N.H., said Amazon made the right move to appease its customers by both changing its testing policy and then issuing an apology. The apology "can't hurt," Wolhandler said. "You have to make a choice between continuing to focus on the question or letting it go."

The DVD price testing "was a bonehead move" by the company, Wolhandler said, but he added that he doubts it will hurt Amazon significantly in the long run. What should be learned by other online retailers from Amazon's experience, Wolhandler said, is that testing and innovation are fine but all customers should be treated equally.

The tests done by Amazon included 68 DVD titles and ran for five days, with the discounts offered to different customer varying from 20% to 40%. After customers complained, Amazon said, an average of $3.10 was refunded to 6,896 customers who had bought their DVDs at higher prices than other shoppers during the testing period.

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