What is Ethical Pricing?
How have you been taught to set your pricing as an indie biz owner? Or maybe you haven’t been taught and you just wing it?
Pricing establishment as well as pricing strategy are two things that each and every business owner should take incredibly seriously. In the current era of small business, unethical pricing practices are becoming standard in most industries. If we wish to do business in a way that is most beneficial for people as well as the planet, then taking into consideration how we implement ethical pricing into our organization is essential. Within this article I unpack signs that point to unethical pricing, including examples. As well, I walk you through ways to begin implementing ethical standards for your pricing practices so that you can walk away understanding what is needed in order to ensure your pricing is morally sound.
Sadly enough, unethical pricing is typical; so typical that we may not even realize they are taking place or that we are falling for them. Some pricing strategies are so shady that they’re actually illegal & you can get fined… where as others are just hyper capitalistic and thus harmful for consumers. One of the many reasons I am very passionate about advocating for ethical pricing standards is because unethical pricing can cause harm to people as well as the planet. We will get more into how this is later on in this article.
Feelings aren’t facts
As someone who has been an online-based indie biz owner for over 8 years, I have seen a lot of trends move in regarding how folks price their services and products. Currently standing, it appears that it is all too common for business owners to choose their prices based solely on what ‘feels good’. Another trend right now is the habit of setting your prices based on what other people in your industry are charging. We must understand that both of these methods are unethical in and of themselves.
Basing pricing on feelings alone is not a logical, reasonable, or data driven strategy. If it’s not that, then what is it? Well, I believe it often is a strategy driven by ego and the desire for more (power, money, superiority, control). The world we currently exist in is driven by money. The more money you have, the more access to resources and power you gain. Therefore, those with more money become those who typically hold the most control over societies. Is this ok? Personally, I do not believe so because it causes many negative social and environmental consequences. When we have a small portion of society containing the most money, we by proxy also have a small portion of society hoarding the most power and control. There are deep levels of privilege that come with access to money. A byproduct of this is that it creates large class gaps where folks are either hyper wealthy or toeing the line of poverty. This ultimately creates an unsustainable society. When we price our services and/or products from a space of ego, power, or privilege, this can therefore cause negative impacts on our surroundings. As business owners, it is our responsibility to care about the well-being of people and the planet because without both of those things, we won’t even have any way of offering our products and services. Not to mention that caring about the planet and society is our moral responsibility as social beings!
Basing your prices on what other people in your industry are pricing is also an unethical method for many reasons, the first being that if unethical pricing strategies are the norm…then copying what other folks are pricing their services or products at will risk perpetuating unethical practices. Each and every business in existence has its own business plan, marketing strategy, mission, vision, target market, unique service or product suite, and more. Even if you are looking at a similar business that functions within your industry, there are still many factors to consider when establishing your pricing…making it not a smart choice to simply copy other peoples pricing. Depending on where you live in the world, your cost of living is something that should be factored into how you establish your prices. Some folks have higher costs of living that can influence their pricing decisions, where as others may have lower costs of living that also influence their decisions. Some people were born into wealth and have easy access to money, where as others do not. Some products cost more to produce than others. Some services require more training, continued education, and ongoing schooling than others. Some products and services require more time, labor, and energy to produce. I could go on but I think you get the point! Pricing is not universal and we cannot treat it as such.
Your pricing as an indie business owner should be determined by making actual calculations, conducting research, and investing deep consideration for what logically & realistically makes sense. Otherwise, the way we price our services & products can uphold as well as perpetuate systems of oppression, discrimination, exclusion, racism, and supremacy. When we change the way we approach pricing & sell, we can have a TREMENDOUS impact on the planet.
Unethical Pricing Examples
There are 7 unethical pricing strategies that I want to highlight in this article, as they are the most commonly practiced in small business right now. As you read about each type of unethical pricing method, consider how you may have had experience with it in the past. As well, think about how you may have consciously or unconsciously practiced them yourself! These types of pricing standards are ones we should be actively trying to dismantle if we are indie biz owners advocating for the well-being of people and the planet.
a note of raising prices
Creating a culture of raising prices whenever we feel like it, without taking into consideration whether we actually NEED to, is likely to create unnecessarily inflated and highly unethical pricing norms. We see this happening all the time which is causing certain products and services to become inaccessible to folks. I’m not saying that there isn’t a time or place for raising your prices or offering premium pricing. What I am saying is that it should be LOGICAL, justifiable, and backed with strong delivery of what you promise! Within the online business world, it is all too common for people to preach the normalcy of raising prices whenever you want to make more money. It’s also normal for people to raise prices without doing any actual calculations to back their decisions or have any reason to justify price increases. We must remember that there is a vast difference between NEEDING to raise your prices and WANTING to raise your prices. Things like inflation, higher costs of living, increased expenses, and so on are great reasons to analyze your prices and potentially consider increasing them. If you do increase them, there should be data collected and calculations done to assess what the increase should be. Just pulling numbers out of a hat because they sound nice isn’t a logical way to establish your pricing!
How do we ensure we are adopting an ethical pricing strategy?
For starters: Understand that ethical pricing happens when both the business owner AND the purchaser benefit from a financial exchange in an equitable way. When we lose equity in exchanges, we often enter into the waters of exploitation of people. Ask yourself: Have you established your pricing from a lens of equity?
5 ethical pricing strategies to consider:
Cost based strategy: When you base your pricing on the cost of producing a good/service.
Freemium strategy: When you offer a great free version of your product/service that builds natural interest in the full version.
Hourly/rate based strategy: When you charge by the hour (reasonable rates that are sensible!).
Project-based strategy: When you charge based on project & deliverables (again, sensibly!).
Value-based strategy: When you set the price of a product/service based on consumer feedback & interest (your consumers HELP you establish pricing!).
As we wrap up this discussion on how to establish ethical pricing for your indie business, I will leave you with some powerful questions to ask yourself when analyzing your pricing. These questions can help you assess whether your pricing is ethical as well as can help you set ethical prices when you are launching a new offer or considering raising your prices.
Questions to ask yourself:
Is my pricing making essential products/services accessible?
Is my pricing potentially harming vulnerable populations?
Are my prices potentially manipulating or taking advantage of consumers?
Have I established my prices from a lens of equity?
What did I factor in to help me determine my pricing?
Have I considered price elasticity before raising my prices?
Who am I limiting access to by charging the way I do?
How can I improve the accessibility of my offerings?
Have I taken the time to collect data, research and do calculations before setting or raising my prices?
If you find yourself unsure how to conduct research or make calculations to support you in establishing ethical prices for your indie business, feel free to reach out! This is something I love to support clients with and would be happy to assist you.
Until next time…
Natalie Brite
