MARKETING ETHICS

Ethical Dilemmas in Marketing Mix: Pricing

Marketing Ethics

Introduction

According to Brassington and Pettitt (2003, p. 391): “Price not only directly generates revenues that allow organizations to create and retain customers at a profit, but can also be used as a communicator, as a bargaining tool and as a competitive weapon.”

Similarly, Shipley and Jobber (2001, p. 301) have suggested: “Price management is a critical element in marketing and competitive strategy and a key determinant of performance. Price is the measure by which industrial and commercial customers judge the value of an offering, and it strongly impacts brand selection among competing alternatives.”

Furthermore, pricing is the most flexible element of the marketing mix in that pricing decisions can be implemented relatively quickly (e.g. price changes) and at a low cost (Lowengart and Mizrahi, 2000).

This significance of pricing notwithstanding, efforts to examine industrial pricing from an empirical perspective are still lacking:

Statements about the importance of price and pricing decisions for contemporary firms are accompanied by calls for additional research into how industrial pricing decisions are made by firms (Tzokas et al., 2000a, p. 192).

The lack of empirical research in the field of industrial pricing is even more evident in the case of industrial services. Thus, while pricing of industrial physical products has received some empirical attention among marketing academics (e.g. Abratt and Pitt, 1985; Baltas and Freeman, 2001; Thach and Axian, 1991; Smith et al., 1999; Tzokas et al., 2000a, b), less emphasis has been given on how industrial services in particular are priced. As Hoffman et al. (2002, p. 1015) have argued:

Today, price remains one of the least researched and mastered areas of marketing … Marketers have only recently begun to focus on effective pricing … Although the need for effective pricing is frequently voiced at conference sessions focusing on services marketing strategy, an overview of specific topics of potential interest has yet to be developed.

However, the distinctive characteristics of services (i.e. intangibility, heterogeneity, perishability, inseparability, the critical role of employees in customer contact, the need for a more extended marketing mix) necessitate a closer look at how they are priced, if an adequate body of empirical based theory is to be developed (Docters et al., 2004).

The present paper tries to contribute to this neglected field by examining the pricing behaviour of industrial service firms. Moreover, an effort will be made to examine the ethical consequences of this behaviour. According to Crane and Matten (2004, p. 12):

Business ethics is currently a very important business topic and the debates and dilemmas surrounding business ethics have tended to attract an enormous amount of attention from various quarters … Consumers and pressure groups appear to be increasingly demanding that firms should seek out more ethical and ecologically sounder ways of doing business.

This emerging interest on ethical issues is also reflected by the empirical studies, which have been conducted by a number of different academics and have focused on the ethicalness of specific marketing practices such as gift giving (Fisher, 2005), direct mail (Neese et ...