Fingerhut’s Price Strategy

Introduction

The importance of ethics cannot be gainsaid as far as the sustainability of any business entity is concerned. Indeed, business ethics has a bearing on the appeal that a particular business has in the eyes of customers, both current and potential, and involves the application of ethical behavior to or values to business behavior. This application would encompass every other aspect of business conduct including the strategies that are used in the boardroom to the treatment that companies give their employees, suppliers and customers, as well as the accounting practices and sales techniques. Of particular note is the fact that ethics would go beyond the realm of the legal requirements placed on the company, in which case it would revolve around the discretionally decisions that the company makes, as well as the behavior that dictates the values that it holds or spouses. However, there are instances where the application of business ethics would seem to contradict the legal requirements for the companies (Ferrell et al., 2011). The fact that companies may not necessarily required by law to act in a certain way often breeds controversial issues or cases that may threaten the sustainability of a company, as is the case for Fingerhut’s price strategy. The determination of the ethical or unethical nature of Fingerhut’s price strategy would necessitate the examination of the “autonomy and creation of desire” by Roger Crisp.

In line with Roger Crisp’s assertions, Fingerhut would have been culpable or guilty of exploiting its low-income consumers through the application of unfair and deceptive marketing techniques (Treviño & Nelson, 2011). Of particular note is the fact that the company has created a database containing detailed information about its customers including their age, number of children, marital status, hobbies, dates of birth and others, thereby allowing it to make predictions pertaining to the types of products that every individual would be likely to require or purchase (Ferrell et al., 2011). This would then allow them to come up with a catalogue of an appropriate mix of targeted specialties on the basis of “statistically determined predictions pertaining to the behavior of customers”. Underlining the comprehensiveness of information that the company would collect is the fact that it would capture as much as 1400 pieces of information pertaining to a household. Crisp would underline the fact that the company purposely targets low income customers upon recognizing the motives that would present the least challenge to their marketing and manipulate the potential customers using their persuasive marketing and advertisement techniques (Treviño & Nelson, 2011). They, essentially, used the information on their clients to determine the behaviors that the customers would be most likely to exhibit, as well as what they would be most likely to need or want subconsciously, before creating the desires in them through the specialized catalogs. Of particular note is the fact that the catalogs were laced with information on easy weekly and monthly payments, which would complement the desires created to influence the potential customers to make the purchase, while making refusal of the offer extremely difficult (Ferrell et al., 2011). It goes without saying that the customers would not even have thought of buying the items if only the need for the same had not been created through the specialized catalogues that had been mailed to them alongside the incredible payment offers. Indeed, the specialization of the business catalogues with goods that matched the likely needs of the potential customers and their capabilities would make the entire business plan and pricing strategy unethical (Treviño & Nelson, 2011). According to Roger Crisp, the marketing technique used by Fingerhut denied its customers of an opportunity to act autonomously, especially considering the fact that the specialized catalogues had specific goods that were aimed at creating a desire thereby forcing the customers to buy the goods rather than making them want the same. Complementing this notion is the fact that the catalogs incorporated information on easy and low payment structures. These eventually masked the real prices that the clients would end up paying, a strategy that Crisp would see as amounting to deception of the clients. Indeed, Roger Crisp would see this as amounting to the brainwashing of the customers so as to create the impression that the items were cheaper than they were while, in fact, the goods thus sold could even have been about 100% more expensive compared to those of their competitors (Ferrell et al., 2011). Of particular note is the fact that the target customers were essentially low income individuals, in which case they can be assumed to have been less educated, and even less informed about the prices in the market, in which case they had no idea as to the variations in the prices of the goods that they paid and the prices that they should have paid in a perfect or fair market (Treviño & Nelson, 2011). This underlines the fact that the marketing techniques and motives used by Crisp were aimed at exploiting the ignorance of the customers, in which case it had acted unethically.

However, other scholars or philosophers would hold a contrary opinion. Milton Friedman, in particular would insinuate that the company had acted ethically as it was operating in a capitalist market, in which case it had a duty to generate as much profit as possible. In addition, it adhered to the fundamental rules laid down by the society. They have carved niche for themselves amongst the low-income or middle income customers, who essentially had bad credit, a group that had been neglected by other companies (Ferrell et al., 2013). The investment of Fingerhut in this group would, essentially, have been a sufficient service to the society especially considering that not only was it making an immense risk by trading with this group, but was also offering it an opportunity to shore up its credit worthiness. Of particular note is the fact that the low income of these customers allowed them to live from paycheck to paycheck, in which case they could not save up for the items that they may actually have needed (Treviño & Nelson, 2011). The extension of the credit line by Fingerhut not only gave them an opportunity to obtain the items that they needed without saving, while also assisting them in building up their credit, an aspect that would eventually assist them in purchasing other necessities in the future (Ferrell et al., 2013). The variations in the price offerings by the company would essentially be justified on the basis of the risk that it was taking with this group. Indeed, other companies may have stayed away from this group thanks to the high probability that the individuals may be unable to make their payments. Indeed, Friedman would insinuate that high risks attract or necessitate high profits in a capitalist system, in which case the exorbitant pricing of Fingerhut’s goods would essentially not amount to the flouting of the ethics by which businesses should abide.

It is evident that the two groups have considerable differences in their point of view, in which case an examination of the facts would be essential. While I may not agree with any of them, combining their points of view would essentially be imperative. Fingerhut is a profit making business that aims at maximizing its earnings through marketing (Ferrell et al., 2013). The use of specialized catalogs, not only drives the agenda of the company but also enhances the relationship between the company and its customers (Treviño & Nelson, 2011). On the same note, the company is not deceiving its customers on the price of the goods, rather it is simply providing information on the options that are available to them. On the same note, it is essentially offering them a way of building their creditworthiness, in which case they can have the capacity to make further purchases in the future.

Using the principled reasoning approach, Jane would come up with the way forward. The problem in this dilemma is the pricing strategy, with the company having to make profits while meeting the requirements of business ethics. The company, as a stakeholder would need profits and a reduction of risks, while the customers would need the goods provided in fair market prices. Abolishing the pricing strategy, as an option, would essentially eliminate the only appeal that the company has as providing low income earners with an option, while keeping it intact may invite more legal problems. Nevertheless, irrespective of the strategy used, it is likely that there will always be disgruntled members of the public, in which case keeping the system intact would be the best option, while ensuring that the customers are aware of the other options in case they choose to pay in full.

References

Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2011). Business ethics: Ethical decision making and cases. Mason, OH: South-Western Cengage Learning.

Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2013). Business ethics: Ethical decision making and cases. Mason, OH: South-Western/Cengage Learning.

Treviño, L. K., & Nelson, K. A. (2011). Managing business ethics: Straight talk about how to do it right. New York: John Wiley.