The relationship between pricing and ethics in two industrial service industries

Abstract

Purpose

The purpose of this paper is to investigate the relationship between pricing and ethics in two industrial service contexts. In particular the pricing practices that lead to non‐ethical pricing behavior along with the factors that could reduce such a behavior are examined. Moreover, the extent is addressed to which companies that do perceive that pricing decisions entail ethical considerations are differentiated from those companies that do not hold such a perception in terms of the pricing objectives that they pursue in order to set their prices.

Design/methodology/approach

In order to achieve the study's research objectives, data were collected from 177 companies, operating in the transportation and information technology industries through a mail survey. Moreover, 20 in‐depth personal interviews were conducted in the initial phase of the research.

Findings

The main pricing practices that were perceived as being non‐ethical by respondents are related to determination of prices that lead to excessive profits, take advantage of a customer's needs and are below cost. Regarding the factors that could reduce such a behavior, the study concluded that a corporate culture that facilitates a customer orientation towards pricing decisions, the market's own mechanisms and the agreements between companies are more effective than governmental intervention. Furthermore, companies that do perceive that pricing decisions are related to ethical considerations tend to follow a more balanced approach when setting prices by pursuing both customer‐ and competition‐oriented pricing objectives, without, however, overlooking financial objectives.

Research limitations/implications

The practical implications of the findings refer to the fact that managers might have a lot to gain by avoiding pricing practices that raise ethical considerations and endeavoring to understand the potential ethical implications of these practices. The significance of these findings notwithstanding, the context of the study is the most important caveat since it limits the ability to generalize the results in other sectors and countries.

Originality/value

The contribution of the paper lies in the fact that it presents the first attempt to empirically examine the relationship between pricing and ethics in an industrial service context.

Citation

Indounas, K. (2008), "The relationship between pricing and ethics in two industrial service industries", Journal of Business & Industrial Marketing, Vol. 23 No. 3, pp. 161-169. https://doi.org/10.1108/08858620810858427