Sunday, October 04, 2009

THE RIGHT THING: ONE PRICE FOR ALL...EXCEPT SOMETIMES

"I'm hoping you can resolve a dispute my boss and I are having," a reader from southern California writes.

Some background: Customer A contacted my reader's company months ago. He ordered, purchased and installed equipment, spending a considerable amount of money in the process.

"He has been a loyal customer for many years," my reader writes, "and spends a great deal of money with our company."

Customer B, on the other hand, is relatively new and has purchased very little from the company. Recently Customer B wanted to buy equipment similar to that which Customer A had purchased. He asked for and received an estimate from my reader's company, but found it a bit high for his taste. He asked my reader to consider giving him a better price on the equipment he wanted to purchase.

My reader and her boss agreed that Customer B should not get a better price than Customer A. After this initial agreement, however, they found themselves at loggerheads.

"My boss believes that both customers should receive the same price," my reader writes. "I believe that Customer A has been loyal to us, has money and time invested with us, came to us first and should get a better price."

Now she wants to know, from an ethical point of view, whether she or her boss is off base.

I contacted my reader for further information, and learned that the company has no policy, formal or informal, suggesting that regular customers should get a break on prices. Nor does it tell customers that, if they spend a cumulative dollar amount, the company's appreciation will be reflected in better pricing.

There would be nothing wrong in having such policies, assuming that the company wasn't violating any pricing regulations, but there's no ethical problem with not having such policies. Obviously there's no ethical issue in not honoring a policy that doesn't exist.

If the boss decides that all current and prospective customers will be treated the same when it comes to pricing, there's no ethical flaw in that approach. It doesn't reward loyalty, as my reader thinks the company should, but it does ensure consistent treatment of all customers, which is not a bad thing. There's something to be said for either approach, from an ethical point of view, and neither one is in any sense wrong.

The right thing for the boss and his managers to do is to decide what the company's policy will be in this area, then to make sure that all current and future customers know the policy. If it's even-steven across the board, fine. If it rewards longer-standing customers, that's fine too - so long as the rationale is made clear, so that my reader and her colleagues don't end up trying to placate angry customers who think that they're being discriminated against.

"I guess the boss wins this battle," my reader told me when we discussed the issue.

That's as it should be, because within certain limits a company is free to determine its own prices and pricing policies. She and her boss did agree, however, that it would help avoid future questions of this nature if the company established a written policy.

On that they both agreed, and so do I.

c.2009 The New York Times Syndicate (Distributed by The New York Times Syndicate)

3 comments:

Anonymous said...

This is one of those business situations where "ethics" and "business" don't quite work to the satisfaction of all. The person who contacted Jeffrey Seglin brings out one of the common situations sometimes true in smaller businesses - that of giving price breaks to certain customers and not to others. The business can't win on this one. If we're going to discuss ethics in such a case, the current price decisions made by this company work fine for them, but in an ethical discussion, make for a questionable practice. Sometimes, business involves making decisions that, if the case were to be discussed from an ethical standpoint, fault is going to be found. Yet, in the real world of business, perfectly legal and ethical decisions are made sometimes that don't seem fair to the casual observer. This would seem to me to be a case where ethics of the matter is for discussion only, and the company will continue to favor certain customers. Unfortunately, in this litigious world, there is always the possibility that the "wronged" buyer will cause legal troubles. I say it's a "no-win" situation for this column.

Charlie Seng
Lancaster, SC

Kenney said...

Jeffrey's suggestion that a clearly stated pricing policy would address the issue is correct. Sorry, Charlie, "business" and "ethics" shouldn't be mutually exclusive terms, or oppositional or situational; consistency is the key. It would be entirely ethical, and therefore good business, for the shop to establish a discount for longer-term, or regular, or loyal customers whose buying in bulk or volume might entitle them to considerations as an incentive. That's a common practice that benefits store and customer.

Bill Jacobson said...

Jeffrey,

There is nothing in ethics that requires that I provide the same goods for the same price to every comer. Each negotiation is different and each buyer's needs are different. As long as I deal ethically with each of them, then the fact that different customers were handed different deals at different times and places is irrelevant.

I made a deal with longterm customer A in which he agreed that my goods were worth what he paid for them. Customer B now comes and wants to make a deal but says that the goods are not worth that price. I have two choices - I can either stick to my pricing and risk losing the sale to B or I can adjust my pricing to land B's sale. If B's price is still profitable, it may well be right from a business standpoint to do so. Ethics do not require otherwise.

While it is true, that A -may- complain about the better deal that B got, that is probably remote and the nature of business. If A complaned, then I would be faced with another decision, adjust A's price or risk losing his future business. These questions are the nature of business but I certainly do not need to reduce A's price unsolicited because I have given that price to B.

William Jacobson
Cypress, CA

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