Author: Rob Docters

A pricer’s job is to capture value, but we tread a fine line between optimizing short term revenues and jeopardizing customer trust by becoming what is labelled as “greedy.” In this article, the author explains what constitutes “greed” in pricing provides strategies to help pricers avoid these tactics. Rob Docters has been Lecturer in Management at Yale School of Management, teaching pricing. Before that he led BCG’s Asia/Pacific pricing practice, based in Singapore. He has also been a Senior Partner at Ernst & Young Canada. He is now Partner at Abbey Road, LLP where he leads the Pricing Ethics practice. He can be reached at

The Journal of Professional Pricing, January 2020

A pricer’s job is to capture value, but we tread a fine line between optimizing short term revenues and jeopardizing customer trust by becoming what is labelled as “greedy.” This is not unique to the pricing function, but pricers have a key role to play in striking this balance. To do this, we need to know what constitutes greed and how this concept has evolved over time.

An Evolution

About 700 years ago, in Medieval England, there lived a baker. At that time, bread was sold by weight, so like other bakers he would take dough and weigh it in front of customers who could see that they were getting their money’s worth. This was, however, also a time of both cheap labor and expensive materials. As such, this baker had a boy hidden under the counter who, after the dough was weighed and placed on the counter, would open a trap-door and grab a handful of dough before it was placed in the oven. This improved the baker’s ROI nicely.

Sadly, for the greedy baker, he was discovered. As this was also a time of harsh punishments, the baker was flogged, paraded through the streets, and hung.[1]

Fast-forward to the 21st century: things have evolved, and in many ways improved. However, the baker’s trick of taking back what has been sold is now used in new contexts. For instance, Apple was recently criticized for exactly that. Expert iPhone users discovered that Apple was slowing down the speed of older models of the iPhone. Some argued this was a strategy designed to induce users to upgrade to newer and more expensive iPhones.[2] Apple says that the slowing was an effort to save battery draw, but only made that announcement after the users detected the speed loss.

Was this an example of greed on Apple’s part? That judgement depends on how much trust you have in Apple. While Apple later announced a substantial reduction in replacement battery prices to offset the change in speeds, this did not defuse customer complaints. If Apple had thought about the problem, they could have done better. For one thing, they could have avoided a naked comparison: if they had simultaneously announced the battery price change as an offset to the change in speed, it might have seemed a fair move.

Price and Terms

Why are term changes important for pricers? It is important because “price” is the formula of give and take—the ratio of goods and services provided divided by dollars demanded. The money price means nothing without knowing the goods or services associated with the price. Sometimes the money gets more attention (e.g. with a “30% Off” sale); sometimes it’s the associated goods (e.g. “longer warranty”). Pricers must have an understanding and a voice on both, or the pricing function is toothless.

Pricing and Greed

It is essential for pricers to be familiar with all the offer strategies which may lead to accusations that a company is greedy or misbehaving. Usually, pricers (or general managers setting price) are held responsible even if they did not change the asking price.

Classic examples of perceived greed come from the telecom industry, where there have been changes in the relationship of dollars versus services offered. This includes the advent of the 57 second minute and illusory bandwidth claims.

Take the first example: for many years the US telecom system charged customers by the minutes of voice time on a call. This made sense, as talk is what you wanted to buy and not the seconds of call-set up and ring time. However, a look in the files of the FCC will show that most telephone companies now charge for all the use of their networks, e.g.: call set up and close down time for mobile calls. Since those components of the call take about 3-4 seconds a minute, effectively talk time is now only about 57 seconds out of the call time. Since this is how the tariff is filed with the government, it’s quite legal. Most people are unaware of this sleight of hand, so the practice has spread. No telco wants to have to explain to its customers that its rate quotes are higher because it does not charge for set up time—there are better marketing activities!

Similarly, internet capacity is traded among carriers and content providers. Consumers are offered specific bandwidth capacities, e.g. 30 MBPS, but in fact cable companies do not always provide this capacity. They do not buy necessary additions during peak hours to accommodate increased demand, so providers have to split capacity into smaller shares. The result is that there is often a squeeze on bandwidth and service is slowed contrary to customer understanding.

Many Growths (“A Garden”) of Greed

The world has evolved since the baker came to a sticky end, and so have forms of greed. New forms of greed have grown up to take advantage of improved technology, greater product/service complexity, context and communication.

A succinct summary of the forms of greed is represented in the “Garden of Greed,” diagramed below, which shows how greed has evolved to comprise a thicket of distinct tactics. The evolution reads roughly from left (early) to right (recent). While the particulars of each greedy tactic have evolved, none of the branches have, to my knowledge, disappeared. There are many minor innovations in greed and deceit; however, they are merely petals growing from each branch.

Pricing and Greed

What makes the morphology interesting is that the new forms of greed can be creative, smart and effective. Each form of greed varies in effectiveness depending on its environment. In an increasingly digital and virtual world, it appears that seizing language has become increasingly popular, and so needs to be part of any marketing analysis.

Examples of the major categories of greed:

  • Bullying or Theft – Theft, robbery and bullying are the most fundamental forms of taking. Large companies often choose to stiff vendors. For instance, a former head of Pricing at GE once commented “it’s very hard for small vendors to get any money out of GE.” Governments are also good at taking, and no one should expect fairness. For instance, the state of Texas used eminent domain to seize land with a length of railroad track, thereby rendering the remainder of the hundred-mile route inoperable. Not surprisingly, they proposed compensation for only the short length taken.
  • Part of bullying is to destroy alternatives – Without an alternative, buyers have little choice. An early example of this occurred when automobile companies bought up tram car lines and pulled up the tracks.[3] This meant that cars were the only viable choice for those needing mechanized transportation.
  • Context—sometimes taking advantage of other’s dire needs. Knowing a buyer’s situation can help sellers target low-alternative opportunities. Some methods are extreme and can be illegal. For instance, New York State recently sued an egg farmer who increased their pricing during the first half 2020 COVID-19 pandemic.[4]

Taking advantage of strong needs can also be subtler: a recent issue of Forbes had the cover story “New Billionaire David Zalik. $9Billion in loans without a cent of risk.”[5] The story describes how Zalik founded a company which offers instant loan processing so that contractors can help homeowners take out loans for home improvement. These loans are usually offered and approved instantly as part of the contractor selling process. His company gets 6% of the loan amount. The actual loans are held by fourteen banks, so Zalik is not the actual lender. His company does, however, help sell the loan. The terms are attractive: the first $10K of the loan is interest free for eighteen months. However, if the loan is not paid off in full within the eighteen months, borrowers owe interest back to day one. Buyers don’t often consider this potential cost at the exciting moment of decision. Is this company’s behavior greedy?

  • Misrepresenting and lying— Misrepresenting a potential purchase is an ancient practice. Hence the Roman graffito: “If fools did not go to market, cracked pots would not be sold.” However, as we move from tangible purchases, where one can “kick the tires,” to intangibles purchases, the potential for misrepresentations multiply. For instance, when purchasing a financial security, one salient question is “what is the risk of loss?” In some cases, in order to win customers or market share, the seller will understate the risk. Interestingly, this is particularly true when the actual returns promised are modest, as the low return implies low risk to many people. For instance, the Schwab “Yield Plus Select” were advertised as highly safe investments. However, when returns on those investments fell, the fund managers moved to riskier real estate securities and incurred a staggering loss. Many investors lost much of their capital[6]. Similar losses occurred in Crypto Currency holdings, when traders employed the “pump and dump” strategy to bid up values then sold their holdings and left less savvy investors with shrunken values.[7]
  • Withdrawal of utility, or “Hooking”. The withdrawal of utility, or increasing prices to take advantage of high switching costs, is different than the Apple tactics, as it is arranged ahead of time through setting a Trap (“Hooking”). In this scenario, the product is divided into more than one purchase so that a buyer needs to buy the related product, which the seller already knows will be needed later (at additional and usually higher cost). This viability of this strategy depends on buyer awareness and the product. For example, blogs today are full of complaints about free mobile apps that are free to download but that subsequently employ stealth selling upgrades.

On the other hand, mandatory upgrades are not always done with stealth. For instance, at one point, Thomson Reuters/RIA, the tax software vendor, sold its software packages without full archival facilities. Accountants who bought the packages believed they were buying at bargain prices. However, when they needed archives for past taxes, they had little choice but to buy the missing archive element from Thomson Reuters—at a less competitive price.

  • Embed an agent. An example of embedding an agent comes from the executive recruiting industry. Many clients ask, and believe, that recruiters will present the most capable candidates to management. However, as related by a partner in a top-two recruiting firm, recruiters will exclude some classes of candidates, regardless of merit. For instance, candidates over 60 years old are usually excluded because they are not consistent with recruiting firm profit goals. Headhunters often make money from follow-on hires, e.g. after a CEO is placed, he will typically ask the recruiter who placed him/her to find other senior team members. The older the CEO, the shorter the interval during which the recruiting firm has an advantaged position. Therefore, even if an older candidate has superior experience and credentials, he will be passed over in favor of embedding a younger executive who can be a repeat client for many years. This placement, in all likelihood, is not consistent with hiring committee goals, but it is definitely more profitable for the headhunter.
  • Seize the language. The inability to use the right words can cripple a marketing effort. For example, the FDA has regulated the use of terms related to over-the-counter (OTC) pharmaceutical products. This includes relatively innocuous products such as “sun screen” and “sun block.” Surprised?

The FDA regulates the use of terms and how they may be used in public, freedom of speech notwithstanding. The rationale for this is that the FDA wants to be ultra conservative about a category that the European Union considers cosmetic. So the FDA limits chemicals which may be used in sunscreen to two chemicals which offer UV-A protection (although they may be toxic).[8] Coincidentally, those two chemicals are protected in patents by incumbent lotion companies. This is a very useful coincidence because it means that only a few companies can claim to offer “sun screen.”[9] The result is very high prices for lotions which are not expensive to produce. Greedy?

But, Is Greed Good?

The 1987 movie “Wall Street” had a main character, played by Michael Douglas, who told an audience of stockholders that “Greed, for lack of a better word, is good.” Upon reviewing the forms of greed, it appears that an addition to the definition of greed found in most dictionaries would be appropriate. Surprisingly, most dictionaries define greed as “extreme wanting.”[10] These definitions do not suggest that being greedy requires a “bad act.” Yet, the greedy actions listed in this article all contain something that many observers would consider unfair, deceitful or dishonest, or at least not positive in society.[11] That is important, as this is the distinction between greed and competition: e.g. an extremely driven musician who seeks to surpass all other artists in his performances is competitive while a Bernie Madoff growing an investment fund by any legal or illegal means is greedy.

Greed and Price Structure

Many people think that greed is related to price structure, but price structures are rarely greedy by themselves. Price structure design is an arcane art, and so may suffer from a lack of understanding and familiarity, which is perhaps why some price structures are prejudged as greedy. Some criticize price structures for violating an arbitrary criterion, e.g. the uniformity of price across scale and inventory (“everything should cost the same”). Yet consumers are used to non-uniform pricing. For instance, when they discover a publicized sale, they are not expecting all inventory to be on sale. Also, they are used to not all inventory being marked down by the same amount.

Scaling of price is a little trickier. No one is surprised that beverages are cheaper per ounce in large bottles than in smaller containers. Similarly, everyone understands the purpose and logic of “buy one, get one half price” and similar structures. But suppose the scaling is not linear. Do honesty and transparency require straight lines?

A top-three charge card issuer introduced a very non-linear transaction rate for merchants in Asia. That price structure sought to influence merchants accepting multiple cards to steer customers to use the charge company’s card. The price break-point was based on a merchant’s historical volumes. The issuer then offered a sharp discount for volumes above that merchant’s historical revenue levels. This led merchants to steer their customers to use the card which offered lower processing and interchange rates to them in the short term. Then, as the merchant crossed the target for new business for the card, the card resumed the old (higher) rates. This proved very effective in Asia, but was not rolled out in North America due to concerns about merchant perception.

Scaling, and Artificial Intelligence (AI)

Some greedy actions are small. For instance, a company that shifts their customer interface from providing live agents, or providing customers with forms, to online PDFs and formulaic Q&A is taking something away from what they may have promised initially. True, this amount is small: shifting the burden of publication and data entry to the user saves companies between $1.20 to $3.50 per form. Society forgives small grabs: the legal expression de minimus non curat Lex represents a practical application of knowing when to ignore. However, when scaled to millions of customers and forms, the monies are substantial. On the other hand, when removing live agents from vital services (e.g. health insurance) creates potentially serious consequences for less digitally-astute subscribers, “scaling” can be an agent of greed.

Scaling could grow as a form of greed as technology evolves. Some fear that AI and improved data gathering have the potential to allow improvements in the execution of greed. For instance, as early as 2016, thousands of Facebook users were tricked by AI into installing malware that led to their account information being hijacked.[12] AI helps criminals and the greedy to be more effective and efficient over a wide range of activities. Machine Learning helps criminals:

  • more efficiently segment prospects, just as it does for legitimate marketers,
  • crack passwords and other defenses against machines (like Capcha), and
  • personalize messages and “phishing” so that potential victims are more trusting.

None of these AI functionalities are, per se, greedy, wrong, or any different from normal marketing functions.[13] However, they do help greedy actors achieve their goals. Particularly important is the fact that AI makes small greedy actions cheaper and achievable with lower effort, thus making them more scalable.

What to Do?

So, what can pricers do about greed in whatever form it appears? There are a number of strategies which can help fend off the proponents of greedy pricing, if that is the goal. This article is not pressing a moral agenda, but rather noting that we live in ecosystems (the “garden”) where people benefit from using means some would describe as greedy. Further, greed may not be a path which results in loyal customers or longer terms revenue optimization. If you wish to thwart greedy actions, you need to start by recognizing most of the tactics used. Then you might:

  • Make clear that price is a balance: the ratio of give and take. For companies, the take usually means the price asked, but management often manipulates the less conspicuous understanding of the give (the product or service) and will be tempted to provide less to the buyers. Easy to do!
  • Have advanced tools and measures to show the harm in some greedy tactics. We all know the sequence of the harm:

Pricing and Greed

This is a good start, but few companies or pricers have identified reliable links among the steps. Have you really quantified the value of your good or service quality? How long does it take customers to respond when, for example, 5% of the market value of a good or service is removed but the price is held constant? What channel events happen after a change in price or value? What is the lifetime NPV of such a move? Without provable measures, the decision will be up to political powers within the firm, and the more ethical, long term, players may not always win.

  • Make incentives include long run results. There are many ways a smart manager with the wrong incentives can optimize to the short-term, thereby leaving chaos in following years.[14] Fortunately, there are early warning signs of greed such as lack of candor about proposed actions.
  • Monitor competitors more closely. In many competitive industries, the competitors may be the ones who will notice short-term impacts first. Their actions, if called out, may be a good early warning signal if the market frowns. The market will often punish poor behavior (for example creating extra customer accounts has hurt Wells Fargo), and violating privacy at Facebook has led to user hesitancy.
  • Pre-emptive ethics and transparency. This has worked well, both for signals to the market and internal signals. One leading soft drink company got a package containing research on new products and potential pricing strategies being undertaken by its primary competitor. The package was sent by an employee of the other company. In reaction, the leading soft drink company immediately returned the information, unread, to the competitor. This signal was clear: only open competition would be countenanced.


Today’s greed is less about the price tag and increasingly more about the service or the offer. Components, quality, embedding, alternatives and messaging/language can often be manipulated less obtrusively than price tags and discounts. Of course, there will be some brute force tactics (e.g. “take”), but they are well understood after one instance. Every pricer should be familiar with all the forms of greed, and have a clear strategy for making sure that other decision-makers do not harm the company’s pricing strategy, reputation and market position.

  1. Mary Ellen Fitzroy, Encyclopedia of Kitchen History (Fitzroy Dearborn, NY 2004), page 49
  2. “Apple has been fined 25 million euros (£21m, $27m) for deliberately slowing down older iPhone models without making it clear to consumers,” BBC News Feb 7, 2020. The fine was imposed by France’s competition and fraud watchdog DGCCRF, which said consumers were not warned. Also: N. Hughes, “To many, Apple’s admission seemed like proof of the company’s grand conspiracy to force people to keep buying new phones.”, December 28, 2017.
  3. On April 9, 1947, nine corporations and seven individuals (officers and directors of certain of the corporate defendants) were indicted in the Federal District Court of Southern California on counts of “conspiring to acquire control of a number of transit companies, forming a transportation monopoly” and “conspiring to monopolize sales of buses and supplies to companies owned by National City Lines”[38] which had been made illegal by the 1890 Sherman Antitrust Act. In 1948, the venue was changed from the Federal District Court of Southern California to the Federal District Court in Northern Illinois following an appeal to the United States Supreme Court (in United States v. National City Lines Inc.)[39] which felt that there was evidence of conspiracy to monopolize the supply of buses and supplies.  United States v. National City Lines , 334 U.S. 573 (1948)In 1949, Firestone Tire, Standard Oil of California, Phillips Petroleum, GM and Mack Trucks were convicted of conspiring to monopolize the sale of buses and related products to local transit companies controlled by NCL; they were acquitted of conspiring to monopolize the ownership of these companies. The verdicts were upheld on appeal in 1951.[41] GM was fined $5,000 and GM treasurer H.C. Grossman was fined $1.[42]
  4. D. Slattery, “New York Attorney General Sues Egg Company Over Price Gouging.” New York Daily News, August 11, 2020
  5. Forbes, September 5, 2017, p. 62
  6. Schwab R. Schroeder letters to investor, July – December 2008.
  7. “Crypto ‘Pump and Dumps’ Distorts Trading,” The Wall Street Journal, August 6, 2018, p. B1
  8. M. Reich “After more than a decade, FDA Still Won’t Allow New Sunscreens.” C&EN (Chemical and Engineering News), May 18, 2015, Vol. 93, Issue 20.
  9. Whereas the FDA has declared only eight ingredients qualified to be called Sunscreen, the European Union has found that 27 ingredients serve this purpose.
  10. The Oxford English Dictionary, Fourth Edition, p. 529, defines greed as “Insatiable longing, esp. for wealth.”
  11. P. Krugman, “The Cult of Selfishness is Killing American.” The New York Times, p. A24, July 28, 2020.
  12. “Beware! Criminals are using AI to steal your personal details.” Data Flair, October 25, 2019.
  13. K. Karlson “8 Ways Intelligent Marketers Use Artificial Intelligence.” Content Marketing Institute, August 13, 2017.
  14. Cf. N. Mayo “Paul Volker on Conflicts, Ethics and the US Banking System,” Economics, History and Geopolitics, December 10, 2019. (blog with P. Volker interview).

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