Blogs & Comment

Why customers should understand your company's business model

If you rely on customers not understanding, that means you really have nothing to offer in the first place.

(Photo: Jan Stromme/Getty)

I’ll put this on the table as a fundamental ethical principle for commerce:

If your business model relies upon customers not understanding your business model, your business model is not an ethical one.

We might justify this principle in at least a couple different ways. We could work from first principles, and say that making sure your customers aren’t deceived goes along with basic standards of respect for other human beings. A decent company wants its customers to benefit, and thinks it has genuine value to offer them. Or we could point out that information is essential to the functioning of markets, and that the moral underpinning of markets requires that market transactions at least approach the ideal of full information for all parties.

Ponzi schemes are the extreme example: they rely entirely on “customers” (i.e. victims) being unaware they are part of such schemes.

But there are plenty of other, less extreme examples. For instance, when pricing is central to your business model (e.g., positioning yourself as an airline offering low-cost flights) then deceiving people about the true cost of your product essentially means hoping they don’t understand your business model, which is essentially as follows: “Advertise low prices, but charge high prices by adding hidden fees.”

Here are a few current headlines about companies that seem to violate this principle:

Note that this principle doesn’t stipulate that all (or even any) customers actually understand your business model. (There are lots of reputable companies that I deal with every day without having any real clue what their business model is.) The principle only says that your business model can’t rely upon people not understanding. If you’re relying on people not to understand, that means you essentially have nothing of genuine value to offer them in the first place.

And for that reason, it strikes me that deception about one’s business model is even more egregious than other kinds of deception in business.