Product Pricing. Ladies, beware the hidden pink tax

When sanitary towels were placed in a higher GST slab, there was a hue and cry. But, in general, women consumers pay more for most products and services as gender-based pricing discrimination exists in the market. Pink tax refers to the extra amount women are charged for certain products or services.

A field study by students of the Indian Institute of Management, Amritsar, under my guidance, comparing the prices of 64 products for men and women in different categories, revealed the biting reality of the pink tax.

The study was done in an important tier II city (Amritsar) across several retail outlets; 25 categories of products, such as watches, sunglasses, combs, shoes (formal, informal and casuals), perfumes, deodorants, fairness creams, razors, talcum powder, undergarments and bags were analysed.

The study covered basic to premium products. In some items, the price difference was barely a few hundred rupees, but in some cases it crossed several thousand rupees. Some other products had a price difference of at least ₹50. (see chart). So, why do marketers charge men and women differently?

A few key reasons companies attribute for this are:

Product differentiation

More expensive raw materials go into women’s products, there is higher R&D cost by companies to create variety in options, higher manufacturing cost and additional expenses in making the packaging attractive and different for women.

The price differential is also because more skilled people are needed to cater to the design and style requirements of women, craft work in women’s products and also in the cut and blend of the fabric (in case of apparel). For instance, a ladies’ tailor usually charges more than a gents’ tailor.

Retail differentiation

These products need to be distributed differently (cosmetic store vs. pharmacy) or placed differently in the store, higher inventory cost due to low sales figures and advertising (health for men and beauty for women) are cited as reasons at the distribution level to justify the price differential.

Women are less price-elastic

Men are assumed to be rational buyers and guided in their choice by a value-based criterion like price. In the case of women, their purchases are guided more by feelings and hence if they like a product (brand), they are unlikely to switch, giving the brand the leeway to charge them slightly more.

Women are more fashionable, more conscious about their appearance, and hence they are willing to pay more and, correspondingly, charged more.

Many of these products are not exclusive for women but even identical products with the same functional benefits or non-functional benefits are charged differently. That’s because of the perceived value of these products to women and also because of lack of awareness among women.

From the women’s perspective, it is observed that two products that are identical or almost identical except for colour (mostly blue/black for men and predominantly pink for women) have price differences.

Price discrimination may also be due to the marketer’s assumption that a woman may not know the cost of the product in some categories. For instance, recently, when I went to a local store selling electrical items to buy a blade guard for my table fan, I was charged ₹90. Next day, when my driver bought the same item, the same store charged him ₹70.

When I confronted the store owner, he said they are of different quality. Though that seemed a plausible reason, the gender of the person who purchases also seems to play a role. The assumption is that women are less aware of products and prices. So pink tax permeates both the formal and non-formal sectors.

Marketers rationalise gender price discrimination through the perceived differentiated offer and the cost of the products.

Since there have been no complaints from women so far, the trend has continued. Pink tax is subtle, not overt, unethical but not illegal, not evident, but significant. Taming it legally could be challenging but if marketers choose to do so, it could be reduced, though it cannot be removed.

The real issue here is to make women aware of the price discrimination. Only if women are aware, and voice their displeasure will it will force companies to rethink/redress it. With no law that prevents this pricing practice, legal intervention against it is not possible.

It is an acknowledged fact that women are paid less than men though gender pay parity is gaining ground.

Women’s low earning leads to less disposable income and, ultimately, low buying power. Is it fair to tax a person with a lower income and low buying power with higher prices?

It’s time for India Inc to think about this.

M Geetha is an associate professor in marketing at the Indian Institute of Management, Amritsar