Is it Smart to Call Your Customers Stupid?

I just read a provocative post about smart and stupid customers on the Harvard Business Review blogs.  It argues that information asymmetry (one party having more knowledge than another) is justification for “savvy” pricing which creates more profitable customers.  In other words, it’s okay to gouge customers as long as they don’t know they are being gouged.

The only problem with that strategy is eventually the customer is going to find out that they were being gouged. In 2004, General Mills found out that they were being gouged by Saatchi and Saatchi New York. While Saatchi has remained on General Mills’ agency roster, they have lost significant chunks of GMI business over the years.

As I have said before in this blog, marketing is about relationships, it is about persuasion, not manipulation. When there is an asymmetry in a relationship, they don’t work.  Relationships based on a pricing strategy that banks on a customer’s lack of knowledge, or lack of market pricing transparency is not sustainable in the long run.

Behaviour like this is why my relatives call me an “evil marketer” at family get togethers (when they aren’t calling me the Nutty Professor).  And this is why we have a culture of mistrust of corporations. Maximizing profit seems like a smart thing to do.  Until the relationship crumbles.  And then, you’re left with nothing.


1 reply »

  1. Interesting point. I don’t think buyers are stupid and even IF they are they’re bound to discuss with their pals and at home and they’ll come around knowing the product and how much it ought to cost. Can’t fool all of them all the time.

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