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The Consequences of Amazon’s Pricing Power
When you're thinking about buying something, what is the first thing you do? For over half of the U.S population (52%) the first step is a visit to Amazon. I like to think of Amazon as the “Target” of the internet- you go in for one thing but, somehow, at checkout, you have $347 worth of stuff in your cart.
The reality is, consumers are not just using Amazon to buy products- they are also using the website to conduct product research. Instead of turning to Google or (gasp!) going to a local retail store to compare products and look at the difference in prices, consumers are heading directly to Amazon to do this.
Because they dominate product search Amazon has incredible price-setting power. This is true in a literal sense (as in the website can literally list the price of a product) but, more interestingly, it is also true in a figurative sense.
Amazon has the power to set pricing values in our minds.
This concept is what psychologists called “price anchoring” and it can be very, very dangerous if it is used to manipulate consumers.
