Segmented pricing

Segmented pricing
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Methods and techniques

Segmented pricing is a situation, when seller or a company establishes different prices (two or more), for one the same product. Even if product have various costs, it do not have influence for different prices determined by enterprises[1]. Segmented pricing is also called “price discrimination” [2]. Segmented pricing, is more productive if it exist segmentation on the market, or perceived value of product in each segment, is comparable with prices set for them, or segments have "different degree of demand" [3]. Also, when customers buy some product or use some service very rarely, segmented pricing is a well-chosen strategy[4]. Segmented pricing, can be implement by coupons. Customers who not pay attention to the price, will not use the coupons, therefore they pay more for product. However clients, who put an effort, and use a coupon, are more sensitivity for a price[5].

Product-mix pricing strategies[edit]

Segmented pricing is one of several different pricing strategies[6]:

  • Discount and allowance pricing
  • Segmented pricing
  • Psychological pricing
  • Dynamic pricing
  • International pricing

Dynamic pricing strategy, is similar with segmented pricing, because different prices depends on different customers segments. Usually, it is based on price negotiation, when enterprise talk with individual customers (from one segment) and negotiate special individual prices. Segmented pricing may be classified as one of dynamic pricing type, because the price is variable and customer segmentation have influence for this process. In general price negotiation is initiated by client, and segmented strategy is initiated by the seller. However, depending on the literature, segmented pricing can be single pricing strategy, or it can be classified as one of dynamic pricing strategy type[7].

Forms of segmented pricing[edit]

Segmented pricing have four different forms[8]:

  1. Customer-segment pricing
  2. Product-form pricing
  3. Location pricing
  4. Time pricing

Customer-segment pricing, it is a form where, price is depend on customer segment. For example, age might be used to set different ticket prices (students, seniors), or depending on region, the product price might be not similar.

Marketing distinguish several types of segmentation[9]:

  • Demographic segmentation (age, gender, family size)
  • Geographical segmentation (region, population destinity)
  • Psychological segmentation (social class, personality characteristic)
  • Behavioural segmentation

Product-form pricing, it is a form where, the price is depend on different version of the same product, which comes from the same source. Location pricing, it is not only a region which customer comes from, but it might be location in cinema, airplane or theatre. The most popular or the best locaton have the highest prices. The price is various, “even if cost offering for every location is the same”. Time pricing it is a form of segmented pricing, where price is depend on the month, the day, the season, or the hour. For example in weekends, ticket price in cinema is higher than on other days of the week[10].

References[edit]

  1. Kotler P., Armstrong G., Wong V., Saunders J.,(2008), p.664
  2. Vogel M., Papathanassis A., Wolber B., (2012), p. 134
  3. Frost R. D., Fox A., Strauss J., (2018), p. Chapter 10
  4. Nagle T. T., Muller G., (2017), p. Chapter - Challenges that can Undermine Segmented Pricing
  5. Stiving M., (2011), p. 94
  6. Kotler P., Armstrong G., Wong V., Saunders J.,(2008), p. 663-669
  7. Frost R. D., Fox A., Strauss J., (2018), p. Chapter 10 (Pricing Strategies)
  8. Kotler P., Armstrong G., Wong V., Saunders J.,(2008), p.664-665
  9. Gbadamosi A., (2013), p. 146-149
  10. Kotler P., Armstrong G., Wong V., Saunders J.,(2008), p.664

Footnotes[edit]

Author: Kinga Dudek