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"competitive upgrade" - is it ethical?

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vlastimil:
Hi there,

just today I found out, my competitor is offering 40% discount to customers who already own my tool and he is calling it "competitive upgrade".

It is understandable that everyone wants as big market share as possible and providing an incentive to switch is not unheard of. But I still do not like it...

What do you think about the ethicality of such action? What would be your response if you were in my shoes?

I am considering returning the favor and offering "competitive upgrade" the other way, but maybe I should not.

Thanks for your opinions!

phitsc:
I've seen this before, can't remember the product though (it was software). Didn't think bad about it, but that was obviously from a customer point of view.

The question is: why should someone who already owns your tool buy your competitor's tool (for whatever price)? The obvious thing I can think of is that he's not happy with yours. So if you think your tool is better than the competition, or offers something unique, I don't think you should be afraid of such an offer.

f0dder:
Is it ethical? I definitely don't think so - but its a cut-throat world out there.

Personally I'd be pretty pissed if somebody pulled an action like that on me, but we have to deal with the free market... and as far as I know, there's no laws stopping people from the nasty price-dumping.

What would you gain from returning the favor? You'd (perhaps) get people buying licenses for your software at a crap price, in hope that they'll stick with your product, and (hopefully) pay for an upgrade later on. But the people you've just "gained" have just shown themselves to be "brand traitors" :)

40hz:
I don't see where it's any different than offering your existing customers a substantial discount not to shop around for alternatives; or switch to a competitor's product. It's called an upgrade price - and software companies are routinely criticized for such price reductions not being large enough.

Competitive pricing (sometimes called "side-grade") is no different than any other loyalty incentive. It can be seen as either a reward - or a bribe - depending on your degree of cynicism and where you currently stand in relation to the product in question.

In most cases, a competitive upgrade amounts to nothing more than offering the so-called 'returning customer' price to a qualified 'new buyer.'

I don't think ethics is a factor at all. In capitalist markets, the whole thing is based on a Darwinian model of "last man standing." Think: economic version of the concept of "tough love."

The capitalist free market model also presumes that the eventual outcome of any market, once it reaches full maturity, will be the emergence of a 'natural monopoly' with one remaining supplier. In theory, that made them the proven 'best choice' by virtue of their survival.

If markets truly were 'free' and competitive, that notion would likely be true. But since they're not, it's little more than the topic of an interesting academic debate.  

Personally, I don't have a problem with businesses that offer incentive pricing.
 8)

cyberdiva:
Personally, I don't have a problem with businesses that offer incentive pricing.
-40hz (January 11, 2011, 06:48 AM)
--- End quote ---
I tend to agree.  Speaking as a customer rather than a developer, I'd be delighted if I were given the opportunity to buy at a substantial discount what looked to be a better piece of software than the one I currently own.  But that would only be true if I were dissatisfied with my present software or I were really impressed by features in the competitor's program that mine didn't offer.  I've seen these kinds of competitive offers from time to time and have never been tempted by them because I was already happy with the program I owned.

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