Introduction
Pricing strategy is the way of pricing a product or a service. The price of a service or product plays a big role in the market. Price plays a big role in the marketing mix since it is the only component that brings about revenue in the firm or organization. The other P’s in the marketing mix are cost consuming and they are only undertaken for value creation for the consumer. Most companies set prices using simple heuristics which is always not with the strategy of the firms and economic reality. Retailers and producers practice pricing strategies that are ethical so as to get high profits without deceiving the competitors or consumers. However factors like the prices set by competitors, availability and convenience that affect the impressions of consumer of fair pricing (Jamal, Angela & Mohammed, 2009, p.231). There are laws of business that protect consumers and competitors from many pricing strategies that are unethical which the deceitful marketers may want to attempt.
Common Pricing Approaches
When the objective of pricing is agreed upon then the setting prices becomes easier. The three options that are considered are the Cost- based pricing, where the prices are usually based on an established or desired profit margin or the rate of the returns on the investments. For instance a clinic can decide to sell condoms that are given free for a price so as to cover the cost of buying. This is not done so as for the person or company to get any profit but so as to just to cover the amount of money that has been used to produce or purchase any product.
The second one is the competitive-based pricing approach which deals with pricing of products or services in reference to the prices of the competing products or services. An example of this is where a company manufacturing life jackets partners with a drowning prevention campaign and it suggests discount coupons so as to make pricing the same as the expensive jackets that are approved the management of Coast Guard. This is usually used by other companies in reference to the products and services of their competitors
The third pricing strategy approach is the value-based pricing where prices are usually based on an analysis of price sensitivity. This is where the pricing analyzes the target adopters while evaluating demand at different points in price (George & Stephen, 2008, p.1072). For instance the price differ in the sophistication of the product used for instance the waste composters that require tossing manually are priced lower than the ones that require simple spinning. The work or service will be the same at the end but the sophistication of the machine is the one that will bring the big difference.
Ethical Considerations in Pricing Strategies
The ethical considerations on the pricing strategies are divided into several categories. The first is the issue of social equity whereby it is the comparison between the fixed and the sliding scale fees. Another issue is the potential exploitation whereby it is the offering incentives monetary wise to women who are drug addicted for voluntary sterilization. There is the issue of impact and fairness of the public shame tactics for instance if the owners of the dirty houses had been fired from their jobs and that would explain why they had not thought of repairing their falling down houses. The other issue is the when the costs fully disclosed (John & Jeff, 2010, p. 241)
Ethical Issues in Pricing Strategies
The first one is the fair pricing whereby producers sell their products at costs which are at whole sale that pay for materials, labor and overhead to make products with a sensible profit margin. Retailers also use mark up the price to more than three times the cost of the wholesale to pay for the overhead and employees with a substantial profit margin for the shareholders of the company and the company itself. Other times retailers cut the prices on the products and services so as to stimulate the sales of scrupulous products or to sell big quantities of the accepted products. This is very unethical as it usually leads to bringing down of the competitors since they will end up falling down due to the unfair pricing.
The second one is the advertising scheme where the laws of trade bind companies which advertise price comparisons. For instance a person claiming to be with selling of cars at a lower price of thousands of shillings than the prices his competitors are selling is bound to produce any documentation that shows the competitors prices and their own so as to prove it (Drug, Anne, Larry& Michael, 2011 p. 511). Those advertisers who usually publish a cheap product or service where the inventory is not much, they usually use bait which is illegal and use a switch scheme with a huge inventory on the same products and services at a price higher than the original. This is so unethical since it will remove the competitors from the market and will end up exploiting people on the other side.
The fourth ethical issue on the pricing strategies is the price cutting. This is usually used by organizations to extremely lower the prices so as to sell the products that are outdated or even at times products that are expired so as to pave way for a new line of products. This is very unethical since people will consume the products not knowing the consequences of using them. For instance some one selling an expired product so a customer who will buy it because it is cheap and later on the customer gets affected, the blame will be laid on the vendor. However, other vendors set their prices at a minimum for new products as a way of introducing them to the market. This is usually a tactic of inspiring the customers to buy their products and trying them. These are not only ethical but also legal issues. A company that is using unethical pricing cuts to bring down the sales of the competitors by selling similar products at lower prices is bad. The federal laws usually protect the competitors from price undercutting.
The fifth ethical issue is monopoly which exists where there is only one type of product. The laws of the federal antitrust always protect the competition in the market place by banning monopolies. The AT&T (American Telephone and Telegraph Corporation) was a monopoly of communications. The company was divided in 1982 by the government and gave rise of new competing phone company. It is also not accepted by law to fix prices or divide markets between competitors so bring down competition. A monopoly that is implicit is formed when one organization sets the price for the whole market. This is usually unethical since it exploits the users of in the market. The customers will have to pay more for the products due the monopolistic feature that is in the market.
The sixth issue on the ethics of marketing strategies is the price gouging. This is a very unethical pricing strategy where the company raises the prices of products that are in high demand temporarily (Ruiliang, 2009, p. 228). This is sometimes experienced in the emergency situations. For instance, the price of the plywood shoots up after floods, despite the fact that there is enough supply for repairing the houses. This is where the dealers make a lot of money since they are taking advantage of the situation of the floods. This is unethical and the federal law doesn’t encourage that. The use of the predatory pricing is also not ethical since it involves the pricing a product very low so as to bring the demand down. This is usually used to end the competition threat. For instance the company that is bringing down the operating to protect the market shares from moving the competition.
Companies issue statements which are ethical that deal with customers as suggested by the Business Ethics Institute. This includes pricing and also has to include the statements of about when the companies or firms can raise or lower the prices. It also states that the company needs to communicate any change of the prices to the customers. This statement should be reviewed often to ensure that the regulations are followed as they are supposed to be followed.
Biblical References dealing with Pricing Strategies
The Bible criticizes over-pricing of products saying that a person should make only reasonable profits and not exploit their clients. In Proverbs 20:14, Solomon points out that most people ask for good bargains and later go on bragging about them. This shows that the company should also be aware that some people can actually pay for their products and are just out to exploit them. It is therefore the duty of the company to balance between pricing its goods not to exploit its companies and pricing them in a way that it is not exploited. In Proverbs 22:1, the author of the book points out that people should seek to maintain a good name rather than over-emphasis on making profits. This scripture if integrated by an organization in its pricing strategy should help it come up with a strategy that ensures that the market has a positive image of it. This scripture also highlights the importance of ethical approaches since unethical procedures may only give the company a lot of profits at the cost of maintaining a good relationship with the market. This means that a company should invest in its public image more than it focuses on charging high prices. This is because the good image will help it secure a large market share and promote consumer acceptability of its products and prices.
REFERENCES
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Jamal, A., Angela, S. & Mohammed, Y.A. Rawwas (2005) Ethical segmentation of consumers in
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