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Legendary Internet Tech Pricing Mistakes and their (a)moral Implications

Legendary Internet Tech Pricing Mistakes and their (a)moral Implications

eCommerce or freeCommerce? In light of Razer's recent 90% off discount coupon nightmare, we discuss all things Internet Pricing Mistakes.

| Editorials in Computer Systems | Posted: May 3, 2013 7:02 am

 

I want to talk about internet pricing mistakes. It's all Chris Ramseyer's fault, our consumer storage editor at TweakTown. He initiated this, but I can't complain - I like the concept. So, huddle closer around the fire pilgrims. Tonight's tale is one of old-fashioned morality and right versus wrong. It also features the rare and very sought-after subject of Internet Tech Pricing Mistakes. I bolded these four words to make it sound important, but I didn't really have to. For some people IPMs are a serious business indeed. There are people out there who keep hunting for those rare online gems every single day. Those lost souls have even created whole forums, dedicated to the Great IPM Hunt.

 

You all know the mistakes I mean. You're browsing the pages of an online retailer, when you suddenly come across a must-have item at a price that sends your heart pulsing with sheer anticipative delight. Can this really be true? Out comes the credit card...

 

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Before we get into all that, here's a famous quote by Mahatma Gandhi:

 

"A Customer is the most important visitor on our premise. He is not dependent on us, we are dependent on him. He is not an interruption of our work; he is the purpose of it. He is not an outsider to our business; he is a part of it. We are not doing him a favour by serving him; he is doing us a favour by giving us, an opportunity to do so."

 

Some experts doubt that this now famous quote should be attributed to Gandhi after all. We may never know whether the great Mahatma has actually spoke those words or not. What is important is the fundamental principle that the quote carries. This simple series of sentences still accurately defines the essence of exemplary customer services today. The Customer is King. Sellers should strive to promptly provide the best service possible, preferably with a winning smile on their faces. At least that's the theory.

 

For thousands of years people have always been trading face to face. Throughout the centuries shopping has been a physical activity, tightly woven within the social fabric of each and every society. Sellers and buyers often knew each other well - they met face-to-face, often becoming acquaintances or even friends. Sellers were able to provide a more immediate and personable service. That's how things were for the largest part of human history, a reality that was to end during the last decades of the 20th century, when home computing and the Internet became a reality.

 

The concept of home computing spread like wildfire, quickly becoming an integral part of the mainstream. The Internet quickly transformed the planet into a live information-exchange global community. Online shopping is just one of the major natural by-products of this revolution. People can now choose from an almost unlimited variety of global products and services, with one downside. For the first time in the history of mankind, the interaction between seller and buyer has become a remote and impersonal experience.

 

What does all this has to do with internet pricing mistakes, I hear you say. Here's a clue: Online buying and selling nowadays has become a truly remote experience. You order, you click next, you confirm. Then some guy in a warehouse (which can be at the other side of the world) receives the order on his computer, pops your item in a jiffy, prints your label and posts it. This kind of distant and impersonal selling has affected the way online retailers react to problems.

 

With the colossal volume of sales that go through the internet every single day, it is unavoidable that all sorts of mistakes will happen. This is not your normal face-to-face retail where people physically go to a shop and choose an item from the shelf. Online shopping can often land you the wrong item, a faulty or unsuitable item, or an item damaged in transit. You can even have your order lost in the post or delivered to the wrong address. As many of us know, RMA'ing faulty items can be a major pain in the backside. That's where the value of decent customer services comes in. Gandhi's quote essentially determines the quality of both pre-sales and after-sales care. It also defines the golden standard that all sellers - both online or offline - must adhere to when dealing with customers.

 

Let's get on with the main subject. What happens when you suddenly come across an obvious huge pricing mistake? Are you going to "exploit" it? "Hell yeah!", I hear some of you yell, hidden behind the relative anonymity of your screens. I have a theoretical question: Is the concept of morality versus exploitation even valid or applicable when used in such a context, anyway? And if you lose the moral battle (as you most probably will), and decide to go for it, will you go just for a single item? Why not hit it for more, get five, ten, twenty, enough to make some money on eBay later?

 

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That's the point where for many people the ethical/moral struggle ends in utter defeat, and the greed versus common sense struggle begins. If you super-exploit the error and order many items, then it is most probable that your order will be rejected straight away and you'll end up getting nothing at all. If, on the other hand, you can put a limit to your greed, and order just a single item, then there is always the chance that the seller will honour the purchase, and you'll end up getting your item for next to nothing. Online retailers often define specific terms that exclude the fulfilment of such erroneously priced purchases anyway.

 

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In the past customers have argued that such terms constitute a blatant breach of their statutory rights as consumers. Still, the severity of enforcement of such limiting terms varies between different retailers. Some may honour such single-item purchases, but would block multiple-item orders. The moral of the story - succumbing to pure unadulterated greed will most probably leave you with nothing.

 

What would you do if you ever came face to face with such a super-bargain? Don't answer that. Not yet, anyway - let's have a look at some examples first. There have been quite a few such mistakes in the past, some of them of gigantic proportions. Companies have also been blamed of using internet pricing mistakes as a marketing ploy to attract public attention to their brand. Who can forget Best Buy's massive "blunder" back in 2009 when they listed a $16,666 Samsung TV for a meagre $9.99. Best Buy ended up cancelling all of the orders placed. Affected customers doubted that the mistake was genuine and accused Best Buy of using this trick in order to attract attention to its brand, and also to gain more website sign-ups and visitors.

 

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Another glaring example was Dell's blunder back in 2011 when a $1000 XPS 15 laptop was advertised for only $25. During the week before Christmas 2011, Dell featured the advert on the Army and Air Force exchange service website. Military and civilian personnel responded immediately and ordered hundreds of units. When Dell realized the error, they cancelled all orders, and removed the advert. This caused a backlash from hundreds of military staff, who flooded Dell with complaints.

 

Dell stood strong and didn't give in, which is something that surprises me to this day. They could easily have turned this "blunder" into a great PR coup in their favour if they wanted to. This is a post 9/11 world which has the US military fighting in hot zones around the world, putting their lives on the line every single day in order to protect the interests of America and its allies. The very least that Dell could have done in such a climate would have been to show a small gesture of appreciation towards the nation's armed forces.

 

A good way to start could have been by openly honouring all wrongly-priced purchases made by armed forces personnel. Putting concepts of morality and right/wrong aside and viewing this purely from a public relations standpoint, such an action in favour of the nation's military would have been the logical thing to do. Such chances to make positive headlines don't come knocking every day.

 

Dell could have taken this a step further in their favour, by incorporating moderate special discounts for people who offer essential services to their communities. Military personnel, firefighters, police officers, nurses, ambulance drivers, social workers and so on. They could have all become entitled to a decently discounted computer for a short period of time. This wouldn't have hurt Dell, and it would make them seem appreciative in the eyes of the public. I wonder what the boys and girls at Dell PR and marketing were doing during that time.

 

They must have been in some kind of collective trance, to have left such an obvious chance for high-profile positive publicity to go to waste. This is just another case of a company isolated within its corporate bubble and losing touch with the real-world, a clear example of the "Customer is King", concept thrown to the pigs.

 

Dell hasn't always gotten away with it, though. In June 2009 Dell Taiwan listed a $4,800 NTD ($148 US) 19-inch LCD monitor for a meagre $500 NTD ($15 US). It took Dell eight hours to correct the mistake, and of course they were too late - 26,000 people had already ordered 140,000 of the monitors. Dell e-mailed all those customers stating that they would not honour the price. They opted to provide a 'reasonable discount' instead for those customers who still wanted to have the monitor. Taiwan's Consumer Protection Commission received over 471 complaints and ordered Dell to honour the purchases, threatening them with legal action. Roughly estimated, a whopping $21 million worth of merchandise was actually super-undersold for just $2.1 million.

 

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It is very logical for most companies to be extremely reluctant to honour such obvious errors, but of course there have also been some notable exceptions to the rule. A very recent one is the case of gaming peripheral manufacturer Razer, who announced recently that they will be honouring all purchases made with an unauthorized 90% OFF coupon code. In a recent Facebook post, Razer's CEO Min-Liang Tan assured customers that the company will fulfil all single-item coupon orders placed.

 

Tan has also asked for people to be patient as some of the deliveries may even take months, while Razer's order backlog is being cleared. The company's Director of Public Relations Alain Mazer, has stated in a recent e-mail to us that "it will take some time to sort out the details of the situation, and our sole interest is shipping product to our faithful customers".

 

I have to say that I am quite impressed with their decision. The international marketplace is a highly competitive and also very volatile global game, an ever-changing medium where first-hand information is the most valuable commodity and reputation is everything. By "doing the right thing" in the eyes of their customers, Razer should be looking forward towards strengthening its future reputation.

 

In the short run this will be an expensive exercise for them, but we have to remember that despite the initial cost, such a consumer-friendly course of action could (and should) translate to increased popularity and higher Razer sales figures in the future - a win/win situation for all parties involved. This is a rare and admirable choice. I applaud Razer for choosing to take the hard path. I asked them for a rough financial impact estimate, but they were reluctant to commit to any figures just yet.

 

So, when you come across the next big internet pricing mistake, what are you going to do? Something tells me that you already know the answer to that one.

 

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