by Roddy Louie, San Francisco State University MBA Candidate, 2012
On Monday 11/5, John O’Meara, Instructor and Director of Strategic Operations at the Department of Management at the University of San Francisco, and Mark Stiving, pricing expert and author of Impact Pricing: Your Blueprint for Driving Profits, spoke to students at the downtown campus (DTC) about the ethical issues involved with how companies market and price their products and services.
John began his discussion by defining three primary objectives firms strive for in marketing: creating value for customers, building healthy customer relationships, and capturing value in return for shareholders. Too often, companies overemphasize capturing value for shareholders to the detriment of the other two objectives. Examples of this include fast food establishments offering unhealthy food in increasingly larger quantities to entice more sales, leading to societal health problems. Or, auto manufacturers that push for SUV sales seeking greater profits, despite exacerbating the oil dependency and global warming problems.
Marketers have developed a wide variety of techniques for capturing value from consumers. Cereal manufacturers are particularly skilled at marketing to children, using toys and freebies to create strong associations to cartoon characters, driving demand for their brands. Another common marketing technique is planned obsolescence, in which consumer electronics are designed with short useful lives, after which they must be replaced with newer models, encouraging waste and overconsumption.
The ethical alternative to this is societal marketing, in which firms focus their marketing efforts on creating value equally for shareholders, customers, the community, and the environment. John brought up the example of outdoor clothing retailer Patagonia, whose sales staff is trained to ask customers whether they really need to buy items before trying to sell them anything. Despite this unusual sales tactic, Patagonia continues to profit, showing that it is possible for a company to be both responsive to the market and responsible to its multitude of stakeholders.
Mark’s talk covered the various ways in which companies use pricing to extract as much value as possible from customers. These practices range from common to uncommon, ethical to unethical. Common pricing practices considered to be ethical include using pricing psychology, value based pricing for software, and implicit collusion with competitors. Common but unethical pricing practices include lying during negotiations in order to secure the best deal possible. Unethical and uncommon practices include explicit collusion, price gouging during disasters, predatory pricing to drive out competitors, and price segmentation based on race. Mark and students then discussed their opinions of the gray areas of ethical pricing, such as when hair salons and laundromats segment price based on gender, and when various service industries segment price based on age. For more information on pricing practices and Mark’s book, visit his website at http://markstiving.com.