It'll cost you to charge more for same product

A reader recently wrote to me and asked, "My company charges one customer 50 percent more than another for the exact same product/service. We're talking about big accounts where the average sale is six figures. Is this practice morally, or ethically, acceptable?"

This reader's question raises a difficult dilemma for many companies: the right to charge any customer any price for any product or service versus the ethics of doing so. A prime reason for this difficulty is that our capitalist economy allows participating companies to charge any price for their product or service.

So, just because a company can convince a customer to pay significantly more for its offering than another customer, and has the legal right to do so, doesn't make it ethically wrong, or does it?

When I received this question, I passed it along to several colleagues to learn their opinions. Without exception, each had the same reaction regardless of whether he/she personally thought the practice was ethically acceptable. Their collective reaction was, "Heck, this person knows it's wrong or he/she wouldn't be asking the question."

My colleagues' reaction aside, we can all empathize with this reader's predicament. Sometimes your company may not adhere to the same level of integrity that you personally do. And with the current state of the economy, it can be very risky to rock the boat and potentially lose an account due to overcharging.

Yet, as sales professional, you must always do what's right for the customer, not what's right for you or your company. Selling is not extortion nor is it an auction process. Selling is providing service to the customer, and personally, I don't know how it's possible for a company to be of service to its customers when it's charging one 50 percent more than another.

If you disagree, and believe the practice of fluctuating pricing is acceptable because it's your company's right to charge whatever the market will bare, I suggest you consider your answers to the following questions before deciding wholeheartedly to continue this practice:

  • Is your company only driven by the bottom line?
  • If your company charges different customers different fees, is it really working in the interest of its customers?
  • If your other customers discovered your flexible pricing, would you have much explaining or backtracking to do? What are the odds you would lose their business?
  • Legality aside, in your gut opinion, is this practice honest or deceptive?
  • How would you feel if you learned that one of your vendors was charging another customer much less than they were charging you? Would you believe this practice was deceptive?
  • If your company is charging some customers more than others for the same product or service, what extras is it providing to justify the higher investment?

One of the biggest complaints regarding modern day business is that, more and more, people feel as if they're being treated superficially rather than as individuals. And no matter how large the customer, it's still the people within that company that make purchasing decisions.

Any vendor that can connect with the buyer(s) at a client company on a one-on-one basis, establish an ongoing relationship built on trust, truly understand their needs, and then meet their needs honestly, can separate their company from almost any competitor.

I won't go into detail as to the other concerns the reader had, but in short, he/she was at an ethical crossroads as to how to bring his/her concerns about the company's pricing tactics to management.

As I replied to this reader, I think the best thing any salesperson in this position can do is to let his/her feelings be known and try to convince the company heads that, without exception, they must always do what's right for the customer, even if it means less immediate revenue.

There's absolutely nothing wrong with charging a premium price, but you'd darn well better offer premium service and make it available to all of your customers.

So, in the short-term in this instance, rather than telling the customer that they've been overcharged, are there extras like product or service upgrades, product training, free service calls, etc., that can be given to this customer to justify the higher investment?

Doing so will not only justify the price the client is being charged, but will undoubtedly strengthen its loyalty, too.

Now, for the long-term practice of charging different customers different prices, I strongly urge that this company, and all companies engaging in similar practices, implement standardized pricing guidelines rather than pricing based upon what it can get a particular company to pay. I understand that many enticements exist for doing so, including immediate cash flow, increased revenue, higher commissions, meeting analyst forecasts, providing higher shareholder dividends, etc.

It's important to remember, however, that a company doesn't enjoy a unique marketing position for very long. As soon as a customer learns of such deception, it will take its business and run. And after it's run, the people running the company will tell anyone and everyone they know of the practices your company employed. Ethics aside, if this is true, is the short-term gain resulting from overcharging really worth the long-term risk?

Ethically, or economically, I can't think of any scenario of when it is.

 


 

Roy Chitwood is an author, trainer and consultant in sales and sales management and is president of Max Sacks International, Seattle.