Friday, August 14, 2009

The Right Way and Wrong Way to Handle Pricing Errors

Pricing errors are a fascinating social experiment. It starts with a website or store mistakenly pricing an item at an outrageous price. Thanks to the power of those old InterTubes, it spreads like wildfire. Before you know it, Twitter is down under the load of people tweeting their good fortune, Facebook changes their terms of service to reflect some other way they think they need to protect themselves, and sites like Woot write wry salutes.

What happens next is interesting. First, the retailer pulls the offending item, causing a hue and cry from those who missed it, and a series of gloating posts from those who got in on the deal...or did they? The retailer has a choice at that moment: honor the error, or issue an apology but cancel the orders. Consumers seem to think there is some sort of legal requirement for this, but the laws are based state by state, and most do not have such protection. PR consultants debate what gets more press: reneging and getting TV coverage of the outcry (any PR is good PR, remember), or "doing the right thing." Debates are spawned, local TV news pieces do their bit, and so it goes.

Case in point, as a study in contrasts:

- Best Buy prices an $1800 TV at $9.99. The cycle kicks off as described. Best Buy cancels the errored orders. The pundits debate, the internet wails.
- ThinkGeek's server went a little schizo, and accidentally priced items as free. The cycle erupts as expected. ThinkGeek says "Whoops! Our bad. Shouldn't punish the customer; keep what you got." The web quietly rejoices and Consumerist celebrates.

The obvious argument is that BestBuy is far larger than ThinkGeek, so they couldn't absorb such an error. But Best Buy's CMO, Barry Judge, has been quite vocal and transparent about their errors before, so why not use this as an opportunity? The obvious answer is the results: ThinkGeek did the right thing, and barely was recognized. Best Buy does the wrong thing, gets tons of PR, has an opportunity to make amends, and all of the web will be talking about Best Buy.

This formula repeats, as well, as Apple, eBay, Amazon and more have shown. Until we as consumers reward companies with PR for doing the right thing as loudly as we condemn them for doing the wrong thing, the cycle will repeat.

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