A firm is producing multiple products, based on the past data firm can segment the customers. Is it possible to offer multiple prices to every customer in the same segment?
Hi Venkata, your question is a practical problem rather than an academic one. Practically, a seller can offer to his potential customer a product at several price. The price quoted is then dependent on (1) quantity, (2) country of origin, (3) different quality, (4) various option chosen, (5) same functional performance but conform to different regulatory requirements, for instance, CE, UL, CSA, CCC etc. Hope the information helps.
The question might not be an academic one, it still is an interesting one. In common trade it is generally accepted that it is something that can not be done. We all know how fast that kind of information is shared between other customers and competitors alike. I assume that you are talking about the same product, so I will exclude two obvious exceptions that would allow different pricing to the same customer segment: difference in quality and the possibility to sell exactly the same product under two different brand names. I would also exclude de use of exactly the same price structure but used within the context of different side arrangements. For instance advertising contributions, return policies that are converted in straight discount percentages, volume discounts etc. are changing de facto the price structure, but they often are well hidden and should not be considered as a difference in pricing. The only successful use of real differences in price structure that I know of is the use of the brand as leverage to obtain higher prices from for instance discount stores with the purpose of obtaining very similar consumer retail prices. It allows the manufacturer / distributor / importer etc. to offer the product both to a regular retailer with full mark-up and to a discount store with substantially lower mark-up. Contrary to expectation, it is the discount store that will be offered the higher price. The few cases I have seen in which this works well is when the brand is so strong that the discount store wants the product even at a premium price.
It depends on the segmentation variable we use in that segment. I think it is more practical in multivariate segments with adopting differentiated approaches of segment targeting. it can be also applied in particular niches in some segment with adopting customization marketing or individual marketing. However, Economists classify this issue as forms of price discrimination policy.
As you point out Ghazi, one of the problems is that economists classify this as price discrimination policies. In reality it is a differentiation in supply, to use their supply/demand model. What makes diversified pricing of a product possible is the simple fact that the product is only one element of the offer, and by building other marketing components around it the supplied product/service is changed