Pricing has two roles, to achieve an economically viable operation and to send a message about the quality of what we offer. Whilst the market still makes decisions on a monetary basis, pricing will be a key element in the business mix. For a company mindful of its place in the ecological balance in the world, the task of pricing is harder than it is for a profit-maximising company. Further for a company mindful of its actions in the ethics of the marketplace the use of its marketing promotions is also more complex.

Tackling the first issue of Pricing and the Environment, we need to ensure that we reflect the true cost of the resources consumed in making our product or service and in replacing them in a world of increasing scarcity. Whilst some airlines give the opportunity to offset the carbon emissions it is not all airlines and it is not compulsory. So the dilemma is how far to go in recouping the replacement cost without putting the customer off purchasing and putting ourselves out of business. In the case of animal welfare, the cost of organic/free range production can be twice as much as battery farming and this does not cover the carbon replacement cost!

So how far can we go?

In the case of farming, the appeal to animal welfare is able to tap into our “softness“ for animals but recovering the costs in an ethical transport industry is much harder. The appeal to the environmental argument has to be very strong indeed, in order to charge what maybe and an unaffordable price.

This brings this on to the Strategic and Tactical approaches is to pricing for a Mindful company. Strategically there is a considerable appeal to be made for constricting the availability of a product/service and creating an exclusivity. Thereby establishing a club of like-minded customers or consumers. This has traditionally been done by the use of price. The very high prices charged for luxury brands has presented a barrier to every day purchase and built an elite status for the those buying. The increased cost of production, the use of high-quality materials and intellectual input (design) has been more than compensated for in the price charged. Can we use this for Mindful goods? Is there a route to market that establishes a high-quality brand and pays a high price for saving the planet?

In one respect there is no reason why we cannot set the same exclusiveness. It would certainly help in the recovery of higher costs of production and replacement of resources. And it could follow the standard pricing strategy of “price skimming“ – that is, starting with a price which is high in order to recover costs and achieve breakeven as soon as possible and then lowering the price to gain mass market appeal. This also has the benefit of applying the impact of the Learning Curve whereby as more experience is gained in production, the cost declines as new ways are found to carry out the same tasks.

Yet there is a philosophical dilemma here. The Mindful Company is often evangelical in its approach to the market and wants to spread its benefit as far and fast as possible. This approach indicates a Penetration Strategy. This is an approach built on the aim of getting as much market as quickly as possible. But it is at odds with the need to compete against non-ethical competitors the charge lower prices. Such a strategy places a greater emphasis on the branding and communications aspects of the Mindful company’s marketing mix which may be very expensive. To be successful here the appeal has got to be other than via price, yet the economic cost of being good cannot be removed from the purchasing equation for the buyer. How much extra cost or pain would they be prepared to pay.

Here perhaps we come to the role of Pricing Tactics and ethics. In the past 10 years we have experienced a decade of the Great Recession and of austerity. There has been a radical change in the use of price as a marketing weapon. We have witnessed a major period of price deflation through the use of special offers and sales promotion, with some products no longer able to command full economic price on the shelves ( an always having to be on “offer” ). Further the use of so-called “shrinkflation” has tricked the customer into paying the same price for less. Such policies and tactics have jaundiced the attitude of consumers who are now very wary of the offers made to them. Their use is questionable for a mindful company that needs an honest relationship with their customers if it is to receive loyalty and word-of-mouth support. The question as to whether such practices as Buy One Get One Free (BOGOF) have a role in establishing a market presence for a mindful company comes to the heart of the business dilemma.

The prime reason for many sales promotions is to speed up sales and hence cash flow in order to achieve a breakeven and return on investment. So this begs the strategic question of how long are you as a mindful company prepared to take in establishing your viable presence in the market?

Do share your mindful pricing challenges, examples and if you have developed or seen, best practice.

Charles Nixon
Chairman
Cambridge Marketing College

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