E-Biz Financial, Inc., provides accounting applications for business customers on the Internet for a monthly subscription. E-Biz Financial customers run their accounting system on the Internet; thus, the business data and accounting software reside on the servers of E-Biz Financial, Inc. The senior management of E-Biz believes that once a customer begins to use E-Biz Financial it would be very difficult to cancel the service. That is, customers are “locked in” because it would be difficult to move the business data from E-Biz Financial to another accounting application, even though the customers own their own data. Therefore, E-Biz Financial has decided to entice customers with an initial low monthly price that is half of the normal monthly rate for the first year of services. After a year, the price will be increased to the regular monthly rate. E-Biz Financial management believes that customers will have to accept the full price because customers will be “locked in” after one year of use.
a. Discuss whether the half-price offer is an ethical business practice.
b. Discuss whether customer “lock in” is an ethical business practice.