😕 Differential Pricing
I recently came across this concept, which I'm not sure how to process.
So the theory goes like this:
The demand curve resembles the graph of 1/x, going infinitely larger on low prices and very small on high prices. It essentially denotes that some customers are willing to pay more than others for a product.
Differential pricing is the strategy of selling the same product to different customers at different prices.
By selling the same product at higher prices to some customers, you make room for selling the same at lower prices to others thereby increasing the volume of sales. The target audience increases.
Is it ethical? I guess it depends on the type of sales strategy.
- In an auction, everyone has the same information and bids on the same item. As prices increase, bidders drop out. That feels fair to me, as the dropping out users don't value the product as much as the ones who are bidding higher. More importantly, everyone has the same information.
- There are clear-out sales in the off-seasons, which is clearly announced at the outside of the shops.
- Flight tickets are relatively cheaper if you book well in advance.
- Loyalty discounts for repeat customers.
- Bulk discounts.
- Student discount.
This can go wrong if there's a conflict or a feeling of unfair treatment in customers' minds. Segmentation on the basis of income looks good to me but what if the information was intentionally hidden from the public?
Consider this scenario: You go to a place with happy hours and you find out it does not apply to you since you're a regular customer there! They know you'd come there anyway so they'd rather put that investment in new potential customers. I'm conflicted by this. I can't pinpoint where this goes wrong but somewhere it does. I don't feel right about this one. What about you? Reply to this mail and share your thoughts.
Until We Meet Again...
🖖 swap