One question which comes up when I am talking to new supplier is “How do you handle discounts”. There are many suppliers who are very anti discounts being applied to their products outside of their control. This can be for various reasons but one that intrigued me is the idea that discounts are unethical. I have not seen much written on this subject but it is definitely worth discussing.

There are a three main issues which come up consistently, firstly the type of discount, secondly reason that the discount is given, thirdly the pricing of a product before/after discount.

The type of discount

There are numerous different types of discounts that can be given. Common discounts include blanket discounts (a % discount is given on all products) or bulk discounts (the classic buy 1 get 1 free). There are also select product discounts (generally done as a ‘loss leader’ to bring people to the site) and many more. All of these mechanisms are designed to overcome buyer inertia and encourage you to make a purchase. I suspect you know these discount types and that you have seen or experienced them within the last few hours, be it from the top three results on a Google search, in the window of a local shop or even on your twitter feed. As such we are accustomed to seeing these and we have probably all bought something because of an enticing offer: so why do some people dislike discounts and find them unethical?

One argument is that people find this type of behavior manipulative and that it can lead to problems with the more vulnerable sections of society who may struggle to evaluate whether it really is a good deal. Another argument is that in some cases retail companies take advantage of their suppliers in encouraging purchases of other products which is an abuse of buying power.

My view on this is that it comes down to the way the retail company operates and how it promotes the discounts, for instance placing a massive REDUCED marker on a product reduced by 3p is not a lie but it is designed to catch people out. This is therefore something to be mindful of when designing the promotion of an offer rather than a reason not to use offers.

The reason the discount is given

Discounts are frequently given to select groups of people, be these people of a set age range, people who show loyalty to a company or even people who submit a positive review. In many respects the group gaining the discount are made to feel privileged and receive a positive reinforcement for this feeling. As such this can be a clever ploy for companies to engage and reward their core audience or even to control the flow of trade (B&Q Diamond Club).

To me this is a clever use of discounting and customer information with no ethical issue as long as it is done in the right way and without abusing customer information. The practice of rewarding positive reviews though is something I can’t help but frown upon. In my opinion it encourages people to act in a immoral way as they are actively encouraged to give a false review or impression of a product which then provides a false impression to future customers and search engines.

Thirdly the pricing of a product before/after discount

In retail you see discounts constantly, online this is often at the top of a search page results. I came across one earlier in the week which stated “70% off Ethical Clothing” this made me wonder what the starting price actually is. A few years back some high street stores in the UK came under investigation for their discounts not reflecting real “before” prices and as such they had to change the way they present discounts to show when the items had been at full price.

I am yet to see this practice of giving information on full price timescales move into the online world with any regularity. You could claim that this comes down to just how hard it is to regulate the online world, however I would claim that if you sell clothing you market as ethical then you have a duty to ensure that you operate ethically yourself. This duty should surely include how you represent your prices and the extent of any discount to your customers.

In conclusion the three points above show that there are many different ways that you can look at the ethics of a discount. For example a discount can be ethical if you are rewarding loyalty from customers whilst ensuring the supplier receives a fair price for the goods. However if the supplier is being put in a difficult position or you are paying for reviews to create a false impression of your company, then I would have to say that you are not operating in an ethical way. As with many things in the ethical debate this means that it is up to the internal ethics of the company. It is due to this that I have decided to put my money where my mouth is and to join the IBSO (International Business Standards Organisation) but more about that in a future blog.