Are Regulations For Prices In The Digital Realm Underway? 🧑🏼⚖️
Pricing anomalies in numerous ecommerce sites are making headlines, with experts criticising an eCommerce platform and legal actions filed recently against game developers in California — both for misleading pricing and discounts. A shift towards more regulated pricing may be taking place. How can your company prepare for these changes? And how do you avoid pricing controversies?
In this article, we will look at two recent misleading pricing accusations that made headlines. We try to figure out what is driving the inconsistencies and motivations of businesses. Then we talk about the risks that could arise as a result of pricing controversies. We also offer advice on how to avoid price-related grievances.
We argue that pricing anomalies can harm the brand reputation and reduce potential profit growth. At Taylor Wells, we believe discounts can effectively increase sales if they are strategic and not deceptive. By the end, you will know how to set appropriate pricing and discounts in order to avoid customer outrage.
Should Digital Platforms Be Regulated To Counter Misleading Pricing?
Is Amazon Implementing Misleading Discount Pricing Schemes?
Recent news about retailers, including the eCommerce powerhouse Amazon, have framed price increases as discounts. According to some reports, Amazon increased the list price of the products so that the displayed discount is equal to or greater than the original price.
Many people believe that these “discounts” are misleading pricing meant to make shoppers think they are getting a great deal when, in fact, they are paying more for a discounted item than its baseline price. This pricing strategy is known as “mark up to mark down” by some in the industry. It involves increasing retail list prices to make discounts appear larger than they are.
Some argue that framing price increases as discounts are deceptive and unfair, while others applauded the strategy as clever pricing. The truth is that, often, these sorts of pricing issues are accidental anomalies of price algorithms and sometimes not. So, what’s truly behind this pricing? We’ll delve deeper into this as we go on.
Another major question is whether or not this pricing scheme is legal. The answer is that it depends on where you are based. Hence, pricing anomalies can lead to lawsuits in some cases.
Did The ‘State of Survival’ Game Developers Commit Misleading Price Advertising?
In California, where fraudulent pricing schemes are illegal, two game developer companies, FunPlus and KingsGroup, are now facing allegations of false advertising.
According to the plaintiffs and their supporters, the game advertises discounts of up to 99 per cent, in one case claiming that a bundle pack costing $9.99 was originally priced at $997.40. However, these items were never sold in the game at their “original” price.
This implies that the developers could be taking advantage of their customers who believe they are getting a good deal. When in fact, they are paying full price.
Discussion On Misleading Pricing And Discounted Sale Schemes
When is pricing misleading?
Businesses can normally set, raise, and lower their own prices. Nevertheless, they are still bounded by law. According to the Australian Competition and Consumer Commission (ACCC), businesses must not mislead consumers about what they will be charged, how much, and why. This encompasses prices presented in store, in advertising, or whenever communicating with customers. If this is not done, the law may pursue businesses for misleading pricing.
Prices that consumers believe are excessively high, or sudden price increases, are not illegal. Even so, the business’s conduct about price setting may be illegal if it hurt competition in a certain way. As we have mentioned , it’s also illegal for companies to make inaccurate or deceptive statements about prices, such as the reason for any price modifications.
What’s happening with Amazon?
The most likely explanation of Amazon’s circumstance is that it is a finely tuned price optimisation technique tweaking an already finely tuned pre-developed algorithm. It could also be an opportunistic attempt to grab attention in order to drive even more traffic to the site in the run-up to Christmas.
The interesting point in all of this though is that pricing could be leveraging the use of flash sales to increase prices and improve sales rankings for best sellers to generate more profits. Although this can also have downsides.
First, you must ensure that customers are not price-sensitive to your best-selling product. If they are, in raising prices you may lose your bestseller and your profits will drop.
Your competition must also be considered. There may be close alternatives that your customers might switch to if you increase your prices. So, what more if you hide it using a flash sale? Which is something that is meant to be a price reduction. It surely can cause customer uproars.
What if the digital realm is regulated to prevent misleading pricing?
Meanwhile, the issue with game developers, FunPlus, and KingsGroup’s pricing is that when users learn about these schemes, they may refuse to make purchases. It even resulted in legal action. The plaintiffs claim they would not have bought if they had known the discounts were not real.
For many years, game developers have worked hard to entice players and make them spend their money. The ease of access, notifications, and advertising on mobile phones has made the task easier for businesses.
Mobile games are highly addictive. The two developers may have been aware of this when they set prices or maybe not. They recognise, however, how invested their customers are in their products. Gambling and the rewards that come with winning are very appealing to people. The pricing scheme could be a psychological ploy.
In-app purchases promise improved player performance. This may lead users to believe that if they buy, they may also have a better gaming experience. What makes the offer more attractive is that players can get it for a “lower” price. This is more likely to occur when the alleged false pricing schemers are vying for when they set their in-app offers.
Are the plaintiffs’ claim that the pricing strategy is illegal correct, or are the game developers simply being clever in their revenue generation?
Technological advancements are increasingly pervasive in our daily lives, creating both valuable new opportunities and exponentially increasing digital anomalies. To genuinely protect customers while stimulating more new technologies, authorities will need to adopt more modern, thorough regulations.
How the lawsuit will proceed will be an interesting point of discussion. But whatever direction lawsuits take, they always have an impact and damage the brand’s reputation. And it is something that your company must absolutely prevent. How can you avoid this type of pricing chaos?
Implications Of Regulations On Misleading Pricing
You may be wondering, “How do I keep my pricing structures and techniques out of controversial news articles?” How can I be certain that my discounting mechanisms are legal? How can I drive profitable revenue growth from discounts and price promotions?
If prices in the digital realm are regulated, costing and pricing policies must be established, clear and documented. But, even before that, there are things you can do to prepare your company in setting reasonable prices and discounts.
Discount pricing is an excellent way to increase sales, as long as it is strategic and does not cross the line into deceptive and misleading pricing.
A discount has a visceral appeal to customers, especially those looking for the best deals or value for their money. Customers are currently risk-averse, according to research, and the economy is uncertain. They will feel cheated, lose trust, and the brand’s reputation and profits will suffer in the long run if they are misled.
When rolling out a sale or discount, make sure you’re providing real value to your customers. Prices for sales should be meaningful and beneficial. Make sure that the price reduction is significant enough for the customer to believe they are getting a legitimate and decent deal.
Furthermore, ensure that you only implement discounts after the product has been available at a regular price for a reasonable period of time. If you decide to use coupons, make sure the terms and conditions are simple and straightforward to comprehend.
You could also consider hiring a team that specialises in pricing. Our findings show that with the right set-up and pricing team in place, incremental earnings gains can begin to occur in less than 12 weeks. After 6 months, the team can capture at least 1.0-3.25% more margin using better price management processes. After 9-12 months, businesses often generate between 7-11% additional margin each year. As they identify more complex and previously unrealised opportunities, efficiencies, and risks.
The cases of Amazon, FunPlus, and KingsGroup are all interesting topics involving pricing. The controversy and debate surrounding these news articles demonstrate how important pricing is for businesses. In addition to raising thought-provoking questions about misleading pricing and ill-timed price techniques. Are the lawyers correct in accusing game developers of malpractice? Most importantly, the issues are pointing to a discussion about regulated pricing, which will pave the way for new ways of doing business in the digital realm.
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