Should companies honor pricing errors on products or services?
In our society most everything is digitized and scanned through computer automation. The retail industry has, at this point, pretty much long been migrated to automated processes. The days of hand-priced merchandise is mostly extinct.Houston Chronicle.
What happens when a scan on the register or price on a website does not match the listed or price on an item? Should retailers honor the posted price or charge the actual price? According to law, retailers do may not have to honor a pricing error; as Consumer Reports notes, this is a myth.
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However, some retailers might honor the price if company policy dictates it, or the retailer may evaluate pricing errors on an individual basis when deciding which price to charge the consumer.
That being the case, there are some reasons why a company may honor a pricing error, even if it takes a loss for the mistake.
Show of goodwillMistakes do happen and some companies may allow an error to stand as a gesture of goodwill. Customers who feel a company stands behind their word, even if it was an unintentional mistake, are likely to be return customers. Allowing a pricing error to go through can be more profitable in the long run.
For instance, in September 2013, United Airlines made a huge blunder on its pricing offering flights for as low as $5.00, which were basically flight fees. Numerous consumers jumped on the freebie deal that was open for a short window of time. The wrongly listed price had been due to human error when entering prices, but in the end United decided to honor those tickets. (Although after a 2015 glitch, United did not honor tickets this time and they lost at least one customer over it).
Build consumer trustMany consumers are inherently suspicious of businesses, feeling they will be ripped off; consider the reputations some industries have (i.e. the stereotypical used car salesmen). By allowing a customer to buy an item at a discounted price, even if it is a mistake, may increase consumer trust.
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Potentially increase customer base and salesA consumer who is given a discounted rate, even in the event it was an honest mistake, will likely sense integrity with the company allowing the lower price to go through. The customer may also perceive the store as valuing its customers and may spread the word through referrals, which is perhaps one of the best endorsements a company can get. This can potentially increase sales over the long-term and simultaneously help build a positive reputation for the retailer.
Other positive gesturesWhile there are many good reasons for a retailer to honor a pricing error, this doesn't mean that, if the mistake is a substantial one that would lead to a heavy loss and harm the business, a company should honor the error. For instance, a company cannot be expected to honor a typo in an advertisement that offers a big ticket item costing $500 on sale for 50 cents. However, what they can do is offer some other sort of gesture of goodwill, perhaps a coupon or other discount for a future purchase or on the item itself.
It is important for the consumer to know that while retailers may or may not allow a pricing error to stand, bait and switch tactics and/or false advertising tactics are against the law. However, mistakes do sometimes honestly happen and how a retailer handles the mistake with customers can have a positive or negative impact. There are some good reasons why it might be in the best interest of a company to honor a pricing error. How a company handles the error can directly have an effect on its reputation.