In a differential pricing method, the price of the same product is set differently based on customers, location, product form etc. The main objective of this method is profit maximization. This pricing is also called as discriminatory or multiple pricing.
Price is set based on the following factors −
Customer segment pricing − Different people will pay different prices for the same product based on the segment they live in. For example, examination fees.
Image pricing − Based on the image of the product in the market, companies will charge differently in the market for the same product. For example, clothes.
Product form pricing − Based on product variant, companies will charge different prices for the same product. For example, the same mobile has different cost in change in colour, storage etc.
Location pricing − Based on location of offering, companies will charge differently for the same product. For example, the cost of executive tickets is different from normal tickets in theatres.
Time pricing − Price of the same product will change according to the time of purchase. For example, seasonal offers, air tickets etc.
Various methods of differential pricing are as follows −
Strategies for differential pricing method are as follows −
The advantages of differential pricing methods are as follows −
The disadvantages of differential pricing methods are as follows −