Eliminating Cultural Bias: Pricingby Colin Berkshire in Telecom
Should obese people who don’t fit into a single airline seat have to pay for two seats?
The vast majority of Americans think that obese people should pay double. After all, they have two seats. Right?
Well, pricing is a complicated thing and it can quickly go down the death spiral of racism and prejudice.
The Chinese are 10% smaller than the Dutch. So if airline seats were sized for the Chinese consumer, how would the Dutch feel about having to buy two seats? As an American, would you be offended if an airline offered a 10% discount to Vietnamese customers?
In the case of obese people immediately jump to the argument of fairness because if you use two seats you should pay for two seats. But when the tables turn and you find that you have to pay more because you are, ahem, larger than average you don’t think your extra bulk should be a factor. (And, if you are American you are likely rather large by global standards.)
This is the fundamental conundrum of product pricing. What is “fair” can very quickly not be “fair.” A pricing plan that discriminates in favor of any customer group can get evil in a hurry.
Take hospitals. The statistics show that hospitals charge black people close to double what they charge white people. Nationwide. Probably in your home city. Yet, they do this on the grounds of “fairness.” WTF? Fairness? Well, yes.
You see, hospitals charge between 2X and 10X more for the very same services to persons without insurance than to people with health insurance for the very same service. Because of poverty, many more blacks lack good insurance and they get charged crazy-insane prices. This isn’t just one city, its a nationwide issue that nobody will take about.
Hospitals see no need to charge everybody one fair price for the very same service. To me, that would be fair. But hospitals know that poor people cannot defend themselves and are powerless, so they charge them more. It’s more evil than Comcast.
So as you start thinking globally you need to reduce your cultural bias. And, we Americans have some pretty strong ones that can be difficult to stomach…ones that we are culturally blind to.
No business is more global than Telecom. In the telecom business we should think and sell globally. This starts with self-awareness.
PS: In the 2007 home foreclosure crisis, far more than half of all foreclosures were due to hospital bills…from persons who actually had health insurance. Really.