4 ms·

I'm surprised this is being cast as Amazon responding to Google's price cuts- the AWS conference was scheduled months in advance so if anything Google heard abo

by evan_ 13y ago

I'm surprised this is being cast as Amazon responding to Google's price cuts- the AWS conference was scheduled months in advance so if anything Google heard about the price cuts and announced their own just ahead of the conference as a (successful; apparently) attempt to take the wind out of Amazon's announcement. Interesting that they dropped by the same amount; either it was a lucky guess, Amazon adjusted their adjustment at the last minute, or AWS has a mole.

pdq 13y ago
I'll go with Occam's Razor: Amazon just responded to Google's newly announced pricing. To believe they guessed correctly or they have a "mole" is pretty far fetched.
- dlgeek 13y ago
  Except Amazon also dropped prices at the exact same event last year, when Google hadn't.
  - pdq 13y ago
    I'm referring to the fact that the prices matched, not the timing.
- awj 13y ago
  So your version of Occam's Razor is "Amazon hurriedly cut prices on a profitable service without much time for evaluation" over "someone at Amazon told Google about upcoming price changes while Google had time to decide they could jump in early on it". I'm not saying that either interpretation is wrong, but I think your use of Occam's Razor here says more about your assumptions than the nature of things.
  - mcintyre1994 13y ago
    Could it be that Amazon had a less significant price drop planned, Google announced theirs and Amazon decided to increase their drop to match? Amazon would have already evaluated what they could drop to, so they'd know as soon as Google announced they could match.
    - awj 13y ago
      Yeah, that could be it too. I'm really just responding to the idea that "a mole" is farfetched. There's a reason that Apple is known for being incredibly paranoid about people leaking business secrets: it happens, often.
  - cmelbye 13y ago
    So in this explanation, Amazon does not proactively investigate how much they can cut prices while remaining profitable? That doesn't make much sense, does it? It would make sense that Amazon knows exactly how much they can cut prices so that they can immediately respond to price cuts from competitors in their highly competitive market.
outside1234 13y ago
At the Amazon, Microsoft, and Google level, I'd suspect that everyone is looking at the same costs in a spreadsheet and saying, "Well, I guess its time to drop to X since it costs Y -- and we might as well do that before the other guys".
nilsbunger 13y ago
If I were amazon, I would've prepared to do a price cut when Google announces one. Then when they announce it, just push the button. Why give up margin earlier than necessary? * Of course waiting to do a price cut till their competitor does leaves a bad taste in some customers' mouths. But I bet they think they're far enough ahead that it doesn't matter. Would Netflix and similar big AWS customers really leave AWS over something like this? * This strategy even has a name: "follow the follower". Very common strategy in sailing.
- evan_ 13y ago
  if it had been a random price-drop announcement then this might be applicable, but everyone was pretty sure that Amazon was going to announce a price drop at re:Invent.
qq66 13y ago
I've worked in competitive pricing before and have a little knowledge of how this works. At all times, companies in competitive situations have a basic economic model they use for pricing. Individual sales reps are allowed to cut price to X level for orders above Y quantity, and if they want to violate that price floor they need executive approval. Simultaneously, the companies have models that are dependent on competitive pricing -- that take into account some assumptions about price and how it affects market share. When a competitor moves in one direction, the executives consult this model to decide how to respond, but at least in the situation I was in, the final decision of how much to cut price was a seat-of-the-pants decision by the EVP of Sales. By "model" I mean an Excel spreadsheet, but I'm sure Amazon is far more sophisticated.

by evan_ 13y ago

pdq 13y ago

I'll go with Occam's Razor: Amazon just responded to Google's newly announced pricing. To believe they guessed correctly or they have a "mole" is pretty far fetched.

dlgeek 13y ago
Except Amazon also dropped prices at the exact same event last year, when Google hadn't.
- pdq 13y ago
  I'm referring to the fact that the prices matched, not the timing.
awj 13y ago
So your version of Occam's Razor is "Amazon hurriedly cut prices on a profitable service without much time for evaluation" over "someone at Amazon told Google about upcoming price changes while Google had time to decide they could jump in early on it". I'm not saying that either interpretation is wrong, but I think your use of Occam's Razor here says more about your assumptions than the nature of things.
- mcintyre1994 13y ago
  Could it be that Amazon had a less significant price drop planned, Google announced theirs and Amazon decided to increase their drop to match? Amazon would have already evaluated what they could drop to, so they'd know as soon as Google announced they could match.
  - awj 13y ago
    Yeah, that could be it too. I'm really just responding to the idea that "a mole" is farfetched. There's a reason that Apple is known for being incredibly paranoid about people leaking business secrets: it happens, often.
- cmelbye 13y ago
  So in this explanation, Amazon does not proactively investigate how much they can cut prices while remaining profitable? That doesn't make much sense, does it? It would make sense that Amazon knows exactly how much they can cut prices so that they can immediately respond to price cuts from competitors in their highly competitive market.

outside1234 13y ago

At the Amazon, Microsoft, and Google level, I'd suspect that everyone is looking at the same costs in a spreadsheet and saying, "Well, I guess its time to drop to X since it costs Y -- and we might as well do that before the other guys".

nilsbunger 13y ago

If I were amazon, I would've prepared to do a price cut when Google announces one. Then when they announce it, just push the button. Why give up margin earlier than necessary? * Of course waiting to do a price cut till their competitor does leaves a bad taste in some customers' mouths. But I bet they think they're far enough ahead that it doesn't matter. Would Netflix and similar big AWS customers really leave AWS over something like this? * This strategy even has a name: "follow the follower". Very common strategy in sailing.

evan_ 13y ago
if it had been a random price-drop announcement then this might be applicable, but everyone was pretty sure that Amazon was going to announce a price drop at re:Invent.

qq66 13y ago

I've worked in competitive pricing before and have a little knowledge of how this works. At all times, companies in competitive situations have a basic economic model they use for pricing. Individual sales reps are allowed to cut price to X level for orders above Y quantity, and if they want to violate that price floor they need executive approval. Simultaneously, the companies have models that are dependent on competitive pricing -- that take into account some assumptions about price and how it affects market share. When a competitor moves in one direction, the executives consult this model to decide how to respond, but at least in the situation I was in, the final decision of how much to cut price was a seat-of-the-pants decision by the EVP of Sales. By "model" I mean an Excel spreadsheet, but I'm sure Amazon is far more sophisticated.