Question 1. What is price fairness?
Price fairness means that the prices offered to the consumers are perceived by them as fair. Pricing can be based on various criteria, and the price which can be evaluated as fair at the market, can be viewed as unfair by the consumers. The act of purchase is in fact a relationship between the seller and the customer, and from this point of view, price fairness is viewed as the fairness of seller’s reward for customer input in this relationship. Other factors which affect customers’ perception of price fairness are equal pricing within a specific social group, and equal pricing associated with special events (e.g. sale or discount coupons). In all cases, customers generally perceive pricing as fair, if it applies to a particular group of people, and is adjusted fairly with regard to a specific factor (e.g. lower prices for students or for aged customers, discounts for loyal customers, etc.). Two main factors of judgment of price fairness are comparison of individual prices to the prices offered to other people, and comparison of prices within a time range.
Question 2. From marketer’s perspective, do you agree Amazon’s differentiated pricing is a good practice? Why or why not?
Amazon’s differentiated pricing is not a good approach to market the goods, because customers can easily figure out price discrimination, and the reputation of the company will be disproved. For marketing, especially for online sales, the company’s reputation is one of the major factors, and the loss of customer loyalty will negatively affect Amazon’s market position. Competition in online sales is tight, and if customers start perceiving Amazon’s pricing as unfair, it is highly likely that Amazon’s revenues will decline. Therefore, the method of differentiated pricing (discriminative pricing) chosen by Amazon is not good, from marketer’s perspective.
Question 3. Can you think of ways that Amazon.com could have managed to “improve”ť customers’ perceptions of price fairness?
Amazon could improve customer perceptions of price fairness, offering different prices for different groups of people, so that people would be aware of the pricing changes. Having an open policy for pricing would greatly help in increasing perceived price fairness for Amazon. Furthermore, Amazon should use some reliable personal data to apply price differentiation (e.g. passport number, identification code or other data which could be verified), because in this case it would not be possible to falsify personal data to get access to lower pricing. In this case, customers would consider Amazon’s pricing as fair, thus increasing the level of trust to the company.