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Unfair Pricing in a Faceless Market

Onyinye Osunwoke Written by Onyinye Osunwoke · 3 min read >

Do you sometimes feel retailers aren’t treating you fairly? I’m certain we have all, at some moment felt unjustly treated with the prices we pay for some goods and services. There could be many reasons behind our grouse. Perhaps we feel we didn’t get a bang on our buck on our spa treatment or in a moment of desperation, a mother is forced to buy urgent diapers in an elite supermarket located in Ikoyi – she thinks to herself, “No way I’m buying this pack of diapers for NGN4,500, when I could get it for NGN2,700 on the mainland”. She’s a long way from home, with likely traffic ahead and a baby crying from a soiled, smelly, soggy diaper. What do you think she would do?

Prices are typically higher in upscale locations. Determinants to this could be increased rents in such areas and popular belief that residents in upscale areas earn more money. Thus, the term price discrimination – and this leads us to our topic on unfair pricing.

Unfair pricing is a dominant topic in the course Business Ethics, taught and discussed at the Lagos Business School. I gather a lot of early-starting entrepreneurs delve prematurely into the world of buying and selling without giving much consideration to the principles to pricing. In pricing, sellers must be smart and they must be fair to their consumers. When they are not, it is called unfair pricing!

Instagram (IG) has emerged to be the new online marketplace for buyers and sellers. I find it to be a faceless business environment, entirely based on trust. On IG, the sellers are fondly called Instagram vendors, and the buyers are called customers or…victims. And I’ll tell you why.

As I was making my payment at the salon today, I watched the lady at the till sniff her wrists and smile to herself happily. Then she looked up at me and said she loves the longevity of her new perfume, and she would definitely be buying it again. I smiled back, so she offered more information. She said she got “lucky with this Instagram vendor”. I laughed. We had both been there. In this instance, she felt satisfied with her purchase because the price met its value.

Now, here’s what some IG (public) sales conversations look like.

Customer/Victim: I like this picture frame. How much is it please?

IG Vendor: Thank you. Please check your DM.

Why can’t the prices be published for all to see? Do they perhaps sell higher to some intending buyers and lower to others? I’ve heard they do this to avoid prying competitors from swooping in and possibly offering reduced prices to gain momentum in the same space. This is called predatory pricing, where prices are offered considerably lower in order to gain unfair market advantage.

Whatever the reason, in the faceless, informal market of IG, can we start to wear a human face as we set prices fairly to deliver value to consumers.


Some key factors to consider in fair pricing.
 
Product cost – this would be the most important factor that affects fair pricing, The cost of the product refers to the total costs incurred from ideation to delivery of the final product or service to the customer. Total costs comprise of variable, semi-variable and fixed costs incurred in the production, marketing, and distribution. I believe fair pricing should be within the periphery of the total costs to start with.
The utility and demand speak to the value of a product to its consumers in relation to the demand of the product. If the demand of a product is elastic, the pricing would hardly affect demand. However, if demand on a product is inelastic, it would be perceived to be of significant value/utility and thus the pricing would affect the pricing. I believe manufacturers selling products with inelastic demand should abide by the ethics guiding fair pricing, such that their products are at a reasonable cost to the customer where the price would closely meet value.
Competition in the market – the extent of competition in the market would affect pricing. Assuming utmost utility on a product, if competition is low, the price on a product could be increased. If there is a lot of competition in the market, the price would be affected by the pricing of its competitors. Businesses with little or no competition should be guided by the ethics of fair pricing.
Government and legal regulations – These would cover those products that have a monopoly in the market. These policies are implemented to protect the consumers/public from undue extortion from businesses that could increase their prices unfairly.
Business objectives – The following would form possible objectives for business ventures.
Profit maximization – if a business’ sole purpose would be to make profits, this would affect its fair decision in pricing its products reasonably.
Surviving in a competitive market – if a business is at the stage of sustaining relevance in the market, it’s pricing would likely be at a minimal.
Attaining product quality leadership – such products might be highly priced due to the high costs of production.
Obtaining market share leadership – to stay as a leader in the market, a business would likely price its products reasonably to maintain and grow its demand.
Marketing methods – expensive or high quality of distribution methods would result to increased prices.      

My best wishes…

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