Price gouging is the lowest form of commerce and social tools should shine lights on the practice

Cash for containers (still from NT Govt ad)The introduction of cash for containers in the Northern Territory has raised the temperature in public debate.

While some argument is about the merits of the scheme (which we have lived with down south for decades and gives my little girls incentive for separating containers for pocket money) much angst has come about due to suspicions of price gouging.

Price gouging is where merchants take advantages of shortages or confusion in a market and use that situation to inflate prices disproportionately. You know what I mean – the sort of thing the banks do whenever the Reserve Bank adjusts interests rates 🙂

Here in the Territory, the finger of blame is being pointed at retailers and manufacturers for exploiting this transition period to inflate prices more than they should.

Ignoring the question about whether or not the scheme should have been introduced, my point is that sharing of fair AND unfair pricing and price increases on Facebook, Twitter and Foursquare could be a useful tool for keeping players honest.

In fact, it already is.

Consumers are getting smarter

I have been working with some tourism operators in Darwin over the last few years and have been struck by the impact that online comments on Google Places, Trip Advisor and, increasingly, Foursquare, are having on businesses.

These online sites appear prominently in search results and the comments by ‘others’ can lead to more business or less business.

Here are a couple of examples. I am staying at Mantra on Esplanade this week and a comment in Foursquare about the premises reads:

Voo H.: Absurdly high internet prices! But maybe that’s the case for all Darwin hotels…

David: The one bedroom option comes with washing machine / drier, kitchen and balcony. Definitely worth it.

These comments swirl around the net, informing consumers who are yet to appear.

Voo H’s comment has already spurred one of my clients to use free wifi as a differentiator in the market, to great effect.

What these comments give us is ‘inside information’ from ‘someone like us.

Interestingly, pubs, clubs and other drink sellers are in a market sector where usage of these social tools is extraordinarily high. The watering hole telegraph will spread good or bad news like wildfire and the drinkers may well follow.

My thinking is that a social reputation is likely to have more impact on the beverage-consuming market that a name and shame by Consumer Affairs.

A deeper issue

Deeper than naming and shaming, the issue of price gouging, where it happens, is one that says a lot about attitudes towards customers.

I believe that exploiting scarcity or confusion for short term gain, reveals a wrong-mindedness. How can you look me in the eye, a loyal customer, and charge me an exhorbitant price today (blamed on container deposits or washed away rail track) and then expect me to remain faithful to you tomorrow?

These moments in time when conditions are ripe for exploiting ‘supply and demand’ economics, give businesses an opportunity to show their true colours.

I always marvel at the price-gouging that takes place in hotel minibars and wifi pricing under the name of ‘convenience’.

While most operators see these elements as opportunity for milking guests for easy money, I am sure the market will reward those who think differently and see these elements as ways to enhance the customer experience and build real trust and loyalty.

Just imagine the fodder created for sharing on social networks:

Steve D: Enjoying free wifi in my room while sipping on a lemonade from the minibar that I paid a decent price for. #winning

I would love to know what you think.


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