Forms of Price Discrimination

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Из курса от партнера IE Business School

Pricing Strategy

447 оценки

IE Business School

Pricing Strategy

447 оценки

Курс 2 из 5 — Specialization Marketing Mix Implementation

Pricing is one of the most important but least understood marketing decisions. Learn and practice concepts, techniques, and get to grips with the latest thinking on assessing and formulating pricing strategies. Analyze how firms attempt to capture value, as well as profits, in the revenues they earn. After this course, you will be able to contribute to the process of formulating pricing strategies for your own products and services, or those of your firm. This course has an additional focus on pricing dynamics and the reaction to and by competitors, taking a highly pragmatic approach and one that is directly applicable to your day-to-day professional life. Martin Boehm - IE Professor and Dean of the Business School with over 10 years experience - will guide you through four modules. We begin with the importance of pricing and how it ultimately can affect the bottom line. Then, we move on to methods to help you decide what is the optimal price for your product; and then price discrimination - should all your products follow the same pricing strategy or should you differentiate depending on the customer segment? Finally, we look at pricing psychology and how you can manipulate customers in order to drive the highest possible price for your product.

Из урока

Playing the Pricing Piano or Price Discrimination

What we see in the real world is that companies don't only charge one price for all their products, but rather set different prices for different products with respect to different customer segments. After looking at the benefits of price discrimination (and the significant revenue and profit potential behind it), you will be able to figure out what type and how to implement price discrimination for your products and services.

What is Price Discrimination6:29

Forms of Price Discrimination3:57

Expert Interviews: Alejandro Hermo of Burger King11:50

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Martin Boehm
Professor of Marketing
Dean of IE Business School

[MUSIC]

In the previous module, we have seen that price discrimination offer significant

benefits for an organization especially from an economic perspective.

So the question now becomes how can a company customize prices for

a particular product?

Fortunately, there are a number of tools available in order to align

prices with the value that a customer places on a particular product.

These tools can be categorized along three different types of price discrimination or

we call it as well, three different degrees of price discrimination.

The first degree of price discrimination means that a company customizes pricing

to each customer equal to the customer's willingness to pay.

Each customer is charged a different price for the very same product.

As a consequence, it is also known as perfect price discrimination.

Unfortunately, perfect price discrimination is very difficult to

implement as it requires knowledge about each individual's willingness to pay.

Once tool to achieve that is running an auction, for instance, where customers

have to publicly share their willingness to pay for a particular product.

That brings us to the second degree price discrimination.

Sometimes it is called as well price discrimination by self-selection.

The first alternative for the first tool in this second degree price

discrimination is trying to over multiple product versions or

multiple product alternatives to the customer.

Just think about British Airways, for instance, offering

an economy class ticket, a business class ticket, and a first class ticket.

Costumers now have the choice to self select them for particular product.

The second tool available is product bundling and

I'm pretty sure that all of you have already purchased bundles before.

Just think of McDonald's offering their value meals,

combining a hamburger, french fries, and Coke for instance.

The third tool we have available is purchase discounts or quantity discounts.

This really refers to the fact when we purchase multiple products and

we receive discounts in return.

The typical examples would be going to a supermarket and paying for

three products, the price of two, for instance.

This brings us to the third degree price discrimination.

Sometimes this is called as well price discrimination

based on customer characteristics.

The first alternative is based on buyer identification.

Typical example here would be trying to charge different prices for

customers going to the cinema.

Based on their age, so you might have a certain price for senior citizens,

another price for adults, and yet another price for students.

Another tool within the third degree price discrimination is

differentiating prices according to purchase location.

Just think of prices that you might be finding in an online channel,

versus prices that you're finding in a brick-and-mortar store.

And I'm pretty sure, that you've already seen, looking at these different channels,

the same product, that prices might be different.

And finally, the last tool would be looking into time of the purchase.

You would expect as well that prices are different depending on

when we actually purchase a product.

The typical example would be holiday packages.

Going on holiday during peak season is typically more expensive than purchasing,

for instance, a holiday package in the off peak season.

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