It took Appliances Online founder John Winning just five minutes to choose between disappointing nearly 200 customers, or losing nearly $100,000 in sales.
Winning was faced with this conundrum earlier this month, when a glitch in his company’s online pricing system listed a blue KitchenAid Mixer and Spiralizer bundle for just $281, down from the actual price of $799.
Though just a few customers snapped up the bargain at first, it was soon posted to deals website OzBargains, and a total of 190 customers managed to purchase the machine before the pricing error was picked up and addressed.
Speaking to SmartCompany, Winning says it took him and his team a matter of minutes to decide the right course of action after the error was fixed, deciding to cop the loss and honour all 190 purchases.
“It was a pretty easy decision — lose close to $100,000 dollars or disappoint 190 potentially life-long customers,” Winning says.
“I didn’t think the pricing was so obviously wrong that customer would have known it was a mistake, they probably just thought it was an insane deal.”
“If we had listed it for a dollar or something like that it’d probably be a different story.”
Winning says the pricing mix-up occurred due to human error when the mixer bundle was inputted into the company’s system and needed a new model number. The price for the bundle was not inputted, so the company’s algorithmic pricing system gave the appliance a price of $281.
A similar mistake has only happened once before at Appliances Online, says Winning, where a header was accidentally entered into an excel spreadsheet for the database for all product pricing on the company’s website.
“This pushed the prices of everything down one row, so you had $5000 items being sold for $30,” he says.
“We picked up on that in five minutes, but we still sell a lot in five minutes. We honoured most of those purchases too though.”
For an established business like Appliances Online, the cost of disappointing nearly 200 customers compared to a cost of $100,000 is a “no brainer” says Winning, but believes businesses should always weigh up the potential advantages and disadvantages when faced with situations like these.
“If you’re a small player and $50-100,000 is going to put you out of business that would be an entirely different conversation,” he says.
“We have a clause in our terms and conditions that we reserve the right to refund customers when there are genuine errors, but we’re not in the business of disappointing customers.”
While Appliances Online did contact each customer who purchased a mixer, the intention was less to do with the pricing mix up and more to do with the colour of the machine, as blue is a less-popular colour of KitchenAid mixers.
“We could have just honoured it but we had to contact them anyway because we didn’t have 190 blue mixers in stock,” he says.
“We told customers there was a mistake but we were honouring it, but it might take a week or so to get the right stock in, or they could choose a different colour of mixer if they like.”
“I figured most of them were buying it for the price, not because of the colour.”