Is sympathetic pricing anything more than a novelty?

Along with quality and availability, price is a crucial arbiter when consumers weigh up what to buy. In general, the cheaper a product or service is, the more appealing. Yet when it comes to sustainability and ethics, consumers are usually expected to pay a premium.

Now a new pricing strategy appears to be challenging that assumption. Unlike traditional “eco” or “ethical” marketing, sympathetic pricing focuses on the needs and-or values of the person paying, rather than the innate social or environmental attributes of what is being sold.

Trendwatching.com, a consumer market analyst firm that recently identified the idea as a top-ten trend for 2015, provides some examples. Take the Community Shop, for instance, which offers price reductions on basic foodstuffs to UK families receiving government welfare. Or consider the network of neighbourhood shops in Madrid that does much the same for local residents who are out of work.

Tactic or trend?

Vicki Loomes, senior trend analyst at trendwatching.com, says such pricing strategies allow brands to show their human side. “They are saying, we care and understand your problem, and this is us putting our money where our mouth is,” she says.

The argument sounds hugely attractive. Think about the resort on Australia’s Sunshine Coast that offers you some money back when unseasonal rains spoil your holiday. Or the French cafe that drops the price of a coffee when customers say “please.” Which consumers aren’t going to be grateful?

Yet sympathetic pricing isn’t beyond scrutiny. For starters, the initial crop of examples is strongly socially-oriented, opening the door for possible conflicts with environmental sustainability. A case in point is the Argentine air-conditioning firm that offers price reductions during summer heat waves. While consumers will welcome being cooler, the energy costs of doing so will leave the climate warmer.

Then there’s basic economics to consider. If a service provider or retailer offers price reductions, someone has to pick up the tab. If not, flatlining profits loom. For a social enterprise, differentiated pricing might just work. For mainstream businesses with shareholders to please, it’s a much harder sell.

For that reason, most early examples of sympathetic pricing tend towards the short-term. At best, it’s a novel way of packaging philanthropy. The case of home improvement store Lowe’s Canada, which gave away 1,000 red maple trees after a heavy storm in Toronto is to be commended, but it’s not new.

At worst, such pricing strategies will strike consumers are gimmicky and disingenuous. “You could equally call it opportunistic pricing, says Ed Gillespie, co-founder of communications consultancy Futerra. “It’s really about brands being lean and nimble in response to events, rather than a terribly clever pricing strategy.”

Smart, responsible pricing

In general, marketers and those working in public relations excel in commercial opportunism. They see a trend and jump on it. By being the fastest or most creative in exploiting it, they hope to boost their brand’s reputation or augment its market share. That’s fair enough. It’s what they do.

Such thinking chimes badly with authentic sustainability though. We saw it first in the early days of the environment movement, when brands tripped over themselves to plaster unsubstantiated “eco” labels across their products. The certification industry remains tainted to this day from the loss of consumer trust engendered by such greenwashing.

The boom in cause-related marketing followed a similar pattern. The theory was simple: hook up with a charity, promise them a percentage of every sale and consumers will lap it up. Done well, it can work brilliantly. The Big Knit campaign, for example, a product-related tie-up between UK beverage brand Innocent and older people’s charity Age UK, has raised more than £1.75m over the last decade. Not all prove such a neat fit. Cadbury’s infamous Get Active scheme saw school children having to collect 5,440 sweet wrappers to get one “free” netball.

The result: yet more jaded shoppers. So when supermarket Sainsbury’s launched a sports equipment voucher scheme a few years ago, consumers were understandably sceptical.

There’s a danger that sympathetic marketing could be heading down the same route, warns Giles Gibbons, chief executive at the consultancy firm Good Business. That’s not to say the idea can’t work. Nor that marketing and sustainability can’t mix. It’s a question of order, he argues: make sure the product or service is sustainable first, then think about how best to flog it.

“Pricing is a tool that all businesses use to sell more of their stuff. If a business has a positive social impact, then you could say by being flexible on pricing that it’s being more successful on getting those things out there”, he argues.

He gives the example of UK medical insurance company PruHealth, which gives discounts to its exercise-taking customers. The more exercise they do, the lower their premiums. As a result, the insurer’s customers are fitter and its payout rates smaller, Gibbons states.

That has nothing to do with sympathy, and everything to do with smart, responsible business.

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