Welcome to the newest installment of our weekly blog series, Ethical Questions for Marketers. Each week we plan to introduce a new topic and explore it in detail, preparing marketers for the day when they face such a problem at their organization.
This week’s topic: Price Consistency
Pricing is an important topic for marketers to learn more about, made even more important due to the fact that is commonly overlooked as a lever we have at our disposal. But pricing decisions do not come without ethical considerations.
Under the subject of pricing consistency, one can run into several ethical problems. Many of us think that if we offer a product, that product has a price. It’s simple. That product costs X.
But that’s not always how it works. Many companies practice some degree of variable pricing.
There are legal issues in variable pricing. For example, it was quite common in the past for companies to charge black people more than whites. That’s illegal. And before the Affordable Care Act outlawed this practice, it was common for health insurers to charge sick people more than healthy people.
Then there are variable pricing strategies which are still perfectly legal. Amazon made headlines early in their rise to dominance in the ecommerce space when it was discovered that the pricing users see on their website doesn’t always match what other users see. That’s because Amazon uses pricing algorithms to determine what price they can charge you as an individual in order to get you to purchase a product. The goal is to charge as much as possible, so that they can maximize their profit.
Many B2B companies and auto dealerships offer customized pricing models, where the price someone pays depends on features and negotiating skills. And B2C companies regularly uses special offers and discounts that are available to only a select audience (for example, email subscribers or loyalty program members).
So where do we draw the line? As long as what you’re doing is legal, it is up to each company to set their own rules around pricing consistency.
To help you, determine how you would explain your pricing strategy to a customer who feels ripped off. If you can’t do it in a way that would make sense to them, you’re probably outside of your ethical comfort zone.