Guardrails & Fairness

Customers believe they’re entitled to a reference price and firms are entitled to a reference profit. When costs rise or capacity tightens, moderate price increases count as fair, but when nothing obvious changes and prices still jump, it feels like “just because we can.”

In practice, that means:

• Cost-tied increases like materials, wages, logistics, and regulatory costs are easier to justify.

• Capacity-tied increases like peak demand and limited slots can work if they’re framed as rationing scarce capacity (not gotcha pricing).

• Pure margin grabs with no visible change often trigger talk of price gouging, even if they make sense on the spreadsheet.

Takeaway: Guardrails force you to decide which bucket your moves belong in and how you’ll explain them.

Every price you set today becomes tomorrow’s reference point. Frequent promotions and unpredictable discounts train customers to expect lower prices and to view the “regular” price as a loss. That has two implications when you’re increasing prices: 

• Don’t half raise and then discount back to the old level – you re-anchor the reference price down and make future increases even harder.

• Make increases predictable, not opportunistic surprises. 

Takeaway: Ask, what expectations will this policy and how it’s implemented create over the next three to five years?

Your guardrails should answer, in plain language: 

• When do we raise? 

  • Cost pass-through triggers (e.g., X% sustained change in input index, wage floors, freight).

  • Value-step triggers (major feature or service upgrades, step-change in outcomes).

  • Capacity/demand triggers (persistent sold-out patterns, long waitlists).

• How much, and how often?

  • Standard annual band (e.g., 3%-5% for inflation/inputs; larger for step-changes).

  • Maximum per year without executive sign-off.

  • Minimum meaningful move (e.g., avoid 0.5% “noise” increases).

• Who’s affected?

  • New vs. existing customers.

  • Contracted vs. non-contracted segments.

  • Rules for grandfathering and phase-ins (e.g., existing customers get six to twelve months at the old rate, then step up).

• What exceptions are allowed?

  • Clear list (e.g., government tenders, strategic lighthouse logos, long-term take-or-pay deals).

  • Required trade-offs (term commitments, volume floors, or reduced flexibility, not “just this once”).

  • Logging and review (every exception visible in a monthly price-exception report).

Takeaway: Guardrails don’t eliminate judgement, but they narrow the playing field and make judgment auditable.

Dynamic pricing and algorithmic price adjustments promise higher realized prices by matching demand and WTP in real time. But perceived fairness and transparency dictate whether customers accept or punish dynamic systems. 

For dynamic pricing, make sure you’re specifying:

• Observable drivers only. Tie changes to factors that customers can understand.

• Bounded ranges. Define the minimum and maximum bands for routine updates (and escalate anything outside of the band to a human for review).

• Fairness rules. No retroactive price changes, no punishing loyal customers relative to new ones, no sensitive segmentation.

• Communication patterns. If customers will see different prices at different times, explain why.

Takeaway: Dynamic pricing without fairness guardrails is just an experiment in churn.

Your policy should anticipate the main games buyers play when you raise prices and give your team default responses. 

• Value-driven buyers care about outcomes and economics, so offer structured trade-offs (longer term, standardized configurations, or volume commitments) instead of rolling back the increase. Use EVE math to show value vs. the next-best alternative.

• Brand-driven buyers care about reputation and reliability, so keep price moves modest but steady; if you’ve failed them in the past, separate service credits from structural price. Compensate in a lump sum, not by quietly cancelling the increase.

• Price-driven buyers will push for rollbacks or threaten to re-bid, so focus discounts on incremental volume (rebates on growth above a baseline) or different SKUs, not on the core rate you just raised. Keep the main increase intact.

• Convenience-driven buyers will pay more to avoid switching, so don’t gouge, but don’t be shy about taking standard increases tied to service and hassle avoided. Just be clear and predictable.

Takeaway: Don’t negotiate values in the moment. Pre-design 3-4 “if they value X, we can flex Y” moves and write them into your pricing policy.