Price discrimination strategy: what you need to know

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In today’s online world, where the physical limits don’t exist, and therefore you can buy or sell what you want from anywhere. New tools and strategies are constantly appearing to make it easier for companies to know the purchasing habits of their customers. And thus be able to set optimal and competitive prices. One of these strategies is: the price discrimination strategy. This strategy consists of selling the same product for a different price. The price of the product may vary depending on the time of purchase, the behavior or the characteristics of the consumer. The aim is to get the most out of each buyer. Thus, this strategy belongs to one of the functions of the famous Price Intelligence.

Types of price discrimination:

There are different kinds of price discrimination strategies. The following are the most common:

1. Perfect price discrimination strategy: The provider analyzes the consumer in depth. Therefore knows the maximum willingness of each customer to pay. According to this knowledge the provider decides  the price of the product sold. That is, the price of each product will depend on each person who buys it. As it says, it seems perfect, however, in reality it is practically impossible to carry out. This is mainly because it is very difficult to determine the maximum degree of willingness to pay for each consumer.

2. Price discrimination according to quantity strategy: It depends on the type of consumer and the amount they buy. For a company it will not be the same to sell a product to an individual than to a company. A person may buy one or two while a company may buy per batch.

3. Group price discrimination strategy: It is used when consumers are segmented by niche and different prices are set according to each group.  For example, when buying a museum ticket it is common to see different prices depending on age such as: adults, kids and senior citizens.

Is using a price discrimination strategy legal?

In most cases, it is about the ability of companies to adapt their prices to market dynamics, which makes it 100% legal. However, price discrimination can be illegal if it is based on race, religion, nationality or sex, or if it violates antitrust and pricing laws.

How do I apply a correct a price discrimination strategy in my ecommerce?

As we have seen, price discrimination depends on many factors and is a delicate task, but it is very useful in an ecommerce pricing strategy. With the right tool, such as Netrivals Dynamic Pricing and a pricing methodology based on rules or parameters that depend on market values, you can benefit from this strategy.

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