Just how much is that widget worth? Why not put it up on eBay and find out?
A growing number of major corporations are doing just that: using eBay and various business-to-business online marketplaces as combination sales and intelligence-gathering tools. Sun Microsystems Inc., for example, has been peddling older workstations, servers, software, and other products in marketplaces for the past 18 months, using dynamic pricing. "Five hundred years ago, when people bid for products in an open market, everything was sold via dynamic pricing. Then businesses mostly moved to a fixed-pricing model," says Alex Rublowsky, group manager for Sun's auction program office. "Now, the Internet has arrived to revive dynamic pricing."
Sun is using auctions to determine the worth of products that are too old to be sold at their original prices, but not old enough to be sent to a liquidator. "Once a product goes off the pricing list, how do you know what to sell it for?" asks Rublowsky. "Dynamic pricing gives us the answer." Such companies as IBM Corp., Gateway Inc., and Xerox Corp. have also dabbled in auctions.
Although Rublowsky says he is generally satisfied with the way things have turned out, he does admit that using an auction for price discovery isn't yet an exact science. "The number of items impacts the quality of information you get," he explains. "If you put up 10 systems, the price will be different than if you put up 100."
Skeptics believe that dynamic pricing doesn't have much of a future except with companies trying to unload outdated, used, or distressed inventory. "There are no real marketing tools behind this effort," says Ellen Naylor, a principal at The Business Intelligence Source, a Conifer, Colo.-based company that advises businesses on marketing strategies. "You're simply throwing something up to see what someone else is willing to pay for it."
Tim Powell, managing director of The Knowledge Agency, a New York based information and strategy consulting firm, is also dubious. "This is on the fringes of transaction models," he says. "It might be one input to a pricing model, but it's really not a good indicator of revenue."