Companies are facing stiff consumer headwinds when they make highly visible pricing changes. Consider these recent events:
- Major banks such as Bank of America, JPMorgan Chase, and Wells Fargo halted proposed monthly usage fees for debit-card purchases after they experienced a high-profile public backlash.
- Verizon Wireless responded to intense pressure from social-media activists by rolling back what it called a $2 “convenience” charge for paying bills online or by phone.
- Netflix experienced a storm of protest over its plan to raise prices (they went up anyway) and to split its service into two parts—streaming video and DVDs by mail (this move got shelved).
- Privately owned toll booths in Greece have been occupied by hundreds of members of the “I won’t pay” movement protesting, among other things, tolls on formerly free roads to finance new construction.
Many businesses have felt compelled to make decisive pricing moves in response to regulatory shifts such as the Dodd-Frank banking-reform legislation in the U.S. or severe economic swings such as soaring raw-materials costs and softening consumer demand. Technology has compounded the effects of these forces by making it easy for a handful of consumers to coordinate powerful pushback campaigns directed at allegedly unjustified price changes. In fact, a single activist using social media has been able to mobilize many of her fellow consumers against pricing actions by both Bank of America and Verizon.
In the past, companies could afford either to ignore a minority of unhappy customers or to respond to individual pressure with targeted marketing. Now, collective pressure makes ignoring consumer complaints a much riskier approach. It also requires that companies possess the public relations savvy to anticipate and eventually respond to such pressure. As a result, companies must now devise more nuanced pricing policies for different situations and must shape their messages more carefully when making major pricing changes.