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The Duties of the Pricing Manager – ethics or profits?

July 23, 2010

Here’s a tough question – better to price for profit or fleece your customers? Is there a happy medium? It’s a hard call – from supermarkets to cars, the role of pricing is to please the board while not deterring customers. How do we manage this?

Funnily enough, looking up ethical pricing in any volume on pricing is not as easy as it seems, although “fair” pricing practices are referred to often.

In his volume on Pricing, Kent Munroe cites these examples of how fairness can be achieved so that customers can at least understand the forces behind the price decisions. Looking at this list, it probably more relates to industry and commercial pricing rather than B2C but it is interesting nonetheless:

  • Communicate how prices are arrived at to all customers.
  • Openly communicate to all parties how price improvements could be achieved (e.g. if they pay promptly).
  • Inform customers of cost increases – research has shown that buyers perceive a company’s cost structure to be fair if a firm maintains prices when costs are declining.
  • Provide a reasonable time period for customers to acquire existing inventory or products before price increases go into effect.
  • Move away from volume or other type discounts towards a buyer reward program (note, I am not sure I agree with this as volume discounts are often perceived as fair and are a negotiation tactic).
  • Consider reducing existing discounts before raising list prices – lower discounts will be viewed more favourably than increased prices.
  • When a competitor introduces increases which cannot be justified, you can follow their price increases because the perception of unfairness will fall on your competitor rather than you. Hmm – not sure that I like that either but the business owner may well view it as a more profitable way to be in the neighbourhood.
  • When raising prices or imposing restrictions, seek ways to provide other benefits to customers so that consumer perception of you remains high.

These are all interesting points; some better than others. Commercial imperatives notwithstanding, it is crucial for brand equity that your pricing and positioning must appear logical in order for it to be successful.

 At A Brand Day Out, we are often highly critical of supermarkets and the like for manipulation of ignorance for commercial gain. If nothing else in your pricing practice, be open, honest and true. Your customers will thank you for it and your reputation will be improved. If you can justify what you do, you are in a better position than those who operate cynically in the path of darkness.

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