Tricky Pricing Reveals Contempt (2017 Feb)

by Barry A. Liebling

Recently I had the unpleasant experience of negotiating a new one-year plan with my cable television and internet provider. Each year I am compelled to take on this task because when the yearly agreement expires (which includes “free promotions” that interest me only because they ostensibly bring down my monthly total) the next month’s bill announces an exorbitant increase. The higher fee can be avoided either by switching to a different provider or negotiating with someone in Customer Retention. I have both changed vendors and bargained with people in Retention numerous times in the last decade.

One of the more obnoxious habits of the cable company I am using is its insistence on quoting prices for the new agreement that end with the phrase “plus taxes and fees.” Why would I have any interest in what the bill will be before “taxes and fees?” I make out one check each month, and the relevant number is the total amount. When I explain that I am only interested in what I will pay, the company representative reads from a script, “We don’t control taxes and fees, it could change any time, and we can’t be sure what they will be.” After I insist on getting a single number the Retention worker usually complies.

Pull back and consider what is going on here. Upper management at the cable company has reckoned that quoting a price minus taxes and fees will seem like a better deal to customers and will help close the sale. Notice that there is no fraud involved, since a customer who probes and asks to know the total on the next invoice will be informed. But company management is counting on the tricky price quote to “nudge” at least some customers into agreeing to a package that is more expensive than they would otherwise buy.

Some people will remark that this is really not a problem. I was not fooled by the cable company, and I obtained complete information before I reached an agreement. But I had to go through the ritual and effort of insisting (against company push-back) on getting a bottom-line quote. Furthermore, while I was not deceived by the low-ball teaser, I am aware that the motive of the company was to catch me off guard and take advantage of my lack of attention. Any business concern that attempts to mislead me gets low marks.

In general, customers are highly likely to have a negative opinion of their cable television company, and I am convinced that the sneaky pricing policies is a powerful factor.

And the practice of half-heartedly attempting to conceal the real price is not restricted to the cable television industry.

How many times have you seen a television commercial for a product that quotes a price, and then says, “plus shipping and handling?” Is it plausible that the seller has no idea how much shipping and handling is going to cost and does not dare to estimate it? Again, the motive is to lure the potential buyer into thinking that the product is a better deal than it really is. What does this policy communicate to customers? It implies that the vendor has nefarious motives and is not to be trusted. Every claim has to be checked. Vendors like these are not your friends.

Sometimes I see commercials that take a different approach to the “shipping and handling” issue. The offer will describe a price and then announce “with free shipping and handling.” Of course, it always costs a company something to send merchandise to you, and that amount is folded into the total price. To the credit of these companies they are providing more accurate information about what they want for their offering up-front and are not attempting to fool their customers (at least not about the price).

I live in New York City where there are thousands of casual food vendors – such as pizza parlors and sandwich shops – where outside signage advertises the price of comestibles with the added phrase “plus tax.” Tax policy changes infrequently, and the food vendors know very well exactly what the customer will have to pay. But again, the idea is to make the price of food “seem to cost less” – when in fact it costs more.

In fairness, most food vendors do not have a deliberate strategy when they peddle their goods this way. Mostly, they are following a tradition that has been in place for a long time. If questioned, they would probably say, “We list prices ‘plus tax’ because everyone else does it.” But the original intent of the “plus tax” description of the price was not benign. The creepy notion is that if people believe they are spending less, they will buy more.

A few food concerns in my neighborhood have signs that read “tax included.” They are doing me a favor because I do not have to do calculating to learn the real cost. They are doing their employees a similar favor, and making their work easier. But, most important, they are symbolically asserting that they intend to be straightforward with their customers.

The lesson of the perverse pricing episodes is that a lot of business concerns are (perhaps unintentionally) alienating their customers. Any attempt to mask or obscure the total price of a good or service will be detected by alert buyers. Even those who decide to be purchasers will have good reason to conclude that the company is not acting in good faith. Bulletin to business owners: Employing tricky pricing policies shows contempt for your customers.

*** See other entries at in “Monthly Columns.” ***

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