13 Dec Why Is Pricing More of Ethics than Legality
Conversely, consider the examples of EpiPen and Daraprim. The price of an EpiPen has gone from $100 for a pack of two to over $600. And the price of Daraprim has been increased from $15 to $750. These price increases do not seem ethical, as the pharmaceutical companies had already set a market price that they believed would cover their costs. In these cases, companies stand out because they can and because they have monopolistic positions. While the economist in us may say that this is a weak argument for calling this behavior unethical, the person in us is telling us that the label feels right. Legal or ethical? – It`s not illegal, and there are no laws that stop this type of pricing. Ethical pricing of a product is an important decision for any business. Companies that use ethical pricing strategies to sell their products and make profits are much more respected than those that harm and deceive their competitors or even consumers.
To practice ethical pricing, you need to be able to recognize the ethical issues that stand in the way of fair pricing. Here`s what you need to know to stay ahead of ethical issues with your pricing strategies. Predatory pricing occurs when a firm uses its dominant position to price its product at a price below cost in order to drive its competitors out of business. Once the competitors are gone, the predator is free to raise prices. Put yourself in your customers` shoes if you ever have doubts about whether a price is ethical or unethical. In most of these cases, unethical pricing occurs when you set prices for yourself – either to harm competition, circumvent a law or regulation, or discriminate against or deceive consumers. The bottom line: look at your competitors to understand the market, but don`t go into a room with them and try to take advantage of consumers. Learn more about competitive pricing.
Dynamic pricing can be an effective way to optimize sales for retailers, but if not implemented responsibly or does not support the overall business strategy, it can carry potential risks, like any pricing strategy. Price discrimination is the strategy of selling the same product at different prices to different groups of consumers, usually based on the maximum they are willing to pay. The practice is also reflected in hiding cheaper items from customers who are more willing to pay. It`s a bit tricky because in some cases it`s socially accepted, but in others it`s rejected. For example, very few people would complain that the 80-year-old man and his 2-year-old great-granddaughter pay $10 less to enter the carnival. But just showing the more expensive hotels to wealthier guests caused a huge PR backlash for travel website Orbitz. Retailers can distinguish between customers and price differences (as long as they don`t discriminate based on inappropriate attributes) and dynamic pricing is perfectly legal. Again a shaded area. Price skimming is when the price of a product is first sold at a very high price and then gradually lowered. The objective here is quite obvious, producers want to capture every step of the demand curve; Consumers who are willing to pay more first buy the product, and then with each price drop, the purchases of a new group are triggered.
Another important clue to deciding if lower prices than the competition are predatory is to remember that it`s your cost: are your prices so low that you lose money on that product? If not, you`re probably fine. However, price segmentation by gender is another story. Articles have appeared in the mainstream press arguing against higher prices for women`s products such as deodorants or shampoos. However, young men pay more for car insurance. People tend to believe, “If I have to pay more, it`s unfair.” Price differences based on gender are in the middle of the ethical scale. While arguments can be made for and against such practices, it is probably best to avoid this form of segmentation as much as possible. Price ethics is the process of analyzing the constraints needed to achieve market share and profitability when one company`s activities hurt others. There is a general consensus that marketing strategies should not violate values such as honesty, transparency, and autonomy. Therefore, the main core of price ethics is the establishment of a balance of power (through information) between producer and consumer. In a completely free market, producers often have the upper hand because they have control over their products and processes. This can lead to unethical practices (use of cheap or harmful materials, lies about benefits, etc.) that are considered harmful to society as a whole.
The goal is to capture the consumer`s surplus (the money that stays on the table by charging a fixed price when some consumers would be willing to pay more) and maximize the area under the demand curve (i.e., revenues). What if part of the strategy is to outperform a competitor? Here, too, the consumer can win. Dynamic pricing can be consumer-friendly in many ways and often leads to a win-win situation for retailers and consumers (i.e. lower prices for consumers, higher volume for retailers). A company that sells products at a loss to drive competitors out of business is guilty Intelligently.com predatory price, according to Price. Companies that do so usually do so with the intention of raising prices for consumers when competition has disappeared. Federal laws protect competitors from this type of price undercutting. The government spun off the company in 1982, creating new competing telephone companies. It is also illegal to fix prices or share markets between competitors in order to harm competition.
A supposed monopoly exists when a firm sets prices for the entire market. Producers also have the advantage of a truly open market when they regulate their materials and processes. However, this could lead to immoral activities (use of cheap or dangerous goods, deceptive advantages, etc.) that are considered harmful to society as a whole. It is important to note that, despite this change, few pricing policies are monitored by the government, largely because the customer does not know who has broken a pricing rule until they see the evidence. For example, while prices that are too low to prevent competitors from entering the market are unethical, it is impossible to prove that price reductions were not the result of competitive prices. In addition, many laws must limit intentions of action rather than results. Therefore, ethics and price legality exist in a grey area that oscillates between ethical and unethical. You`ve probably heard the joke: “How do you know if a salesperson is lying? His lips move. To be fair, there are many ethical sellers out there. There are also those who lie during negotiations. The most common unethical behavior, sellers often justify lies by correctly saying that the buyers they are negotiating with are also lying. A more ethical approach would be to sell the value of the offer and not give in to the price.