When you go to the cinema there will be a different price for adults compared with senior citizens and most people are OK with that. In this Vlog, Grant asks; … but would you still be OK if there was a different price for men and women?
When you go to the cinema, there’ll be a different price for adults compared with students or senior citizens. and most people are OK with that. But would you be OK if you went to the cinema and there was a different price for men and women?
So what we’re talking about here is Price Discrimination and it’s one method you can use for optimising your profits, but you have to make sure there is a rationale for what you’re doing and it seems fair. The reason why you can charge two different prices for the same product is because most people understand that students and senior citizens tend to have tighter budgets and, therefore, it seems fair to most consumers. Price Discrimination is one mechanism we have and that’s when we discriminate against different audiences.
But Price Differentiation is another. Price Differentiation is not when the audience is different, but when the circumstances are. For example; take a film, you would charge a different price for a Saturday night, then a Tuesday afternoon. The screening of the film is exactly the same, but the circumstance change. It’s much easier for cinema to fill out it’s auditorium on a Saturday night than on a week day matinee.
Finally we have Dynamic Pricing, where there is no seemingly fixed price but it varies depending on the demand. A good example of this, of course, is airlines – where you can go onto our website and get the price of a ticket and a week later look at exactly the same ticket on exactly the same date and find that the price has changed. What has varied is demand; where the demand has gone up or has stayed stagnant as we get closer to the date, the price will change.
The point is that in many business to consumer offerings we are used to this kind of variable pricing and yet in business to business, many companies just don’t make use of it. Rather than charge one set price, are there opportunities for you to charge different pricing to optimize your profits depending on the circumstances, or people, or demand, of your products and services?
There may be small changes to the spoken word in this transcript in order to facilitate the readability of the written English
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Comments
Hi Grant. Yes our business model is based on putting multiple leaflets through each letterbox at the same time (normally 3 – 4). When we have a situation of only 2 leaflets going out in an area or areas we find that by sending an email to our client / prospect list we can often drum up extra business for those ‘lite’ rounds by offering a discount on our normal prices. This method can often prove very effective. We put strict limits on availability though.
Hi Jeff, thank you for the example from your business. It is a useful illustration of how these ideas can work.