Price confusion will end in tears

Anyone remotely interested in personal finance knows all about price confusion. With the PEPs season in full spate, how could it be otherwise? To the manifest difficulty of comparing highly selective speculative earnings projections within different markets and funds must be added the unwelcome complexity of front-end loadings, management and exit fees, not to mention the finely calculated advantages of tax shelters.

All right, perhaps finance is not for the unsophisticated. But neither need it be so arcane. Involved pricing structures affect to offer value for money. In fact, they obscure the basis on which the consumer may make a sound judgement.

Alarmingly, the price confusion contagion is spreading to other parts of the marketing world. It has been at work with mortgages, the insurance market and credit cards. The Scarborough Building Society was successfully prosecuted over it; even the saintly Co-operative Bank has succumbed to temptation. It’s gnawing away at the travel market, and can be seen to particularly good effect in cut-throat cross-Channel promotional activity. Then there’s the telecoms sector. Mobile telephones are the most conspicuous offenders, with their confusing barrage of price tariffs which fail to compare like with like. But more recently BT, leaning on US marketing expertise, has joined the merry throng with a plethora of discount schemes, whose true worth would demand hours of diligent application on a pocket calculator to establish. And let’s not forget British Gas and the utilities companies…

All these sectors have something in common. They are areas which have experienced rapid change, and more importantly, are in the throes of fierce competition. The result: widespread adoption of what is, fundamentally, a weak and defensive strategy which undermines branding.

This point may seem openly contradicted by BT’s – or Orange’s, or One2One’s – colossal spend on image advertising. But it is not. These campaigns support the discount strategy, not the other way round. To point the difference, look at Barclaycard which, uniquely perhaps, remains a strong brand in an increasingly commoditised area, yet does not resort to pricing tactics and tease discounts.

The big problem with pricing confusion is it eventually promotes what it seeks to avert: consumer distrust. Consumers no longer remember what, if anything, the brand stands for. Promiscuously, they shop on price. Procter & Gamble admitted as much recently when it withdrew a plethora of discount offers in the US on the grounds that 55 price changes a day across 110 brands offering 440 promotions a year must surely test consumer patience to the limit. Too right.

Cover Story, page 42

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