Price Discrimination Policy of Business Firms
Price discrimination is an important strategy to enhance the revenue as well as the market shares. There are different forms of price discrimination here the firm charge differently for same product and services to different customers.
Price Discrimination Strategy by Monopoly or Oligopoly Firms:
In the monopoly kind of competition a single player dominate the market in term of the pricing, still that does not mean people are forced to buy the product, as long as people can afford to buy and feel it can fulfill their need and it is worth value for money people will buy otherwise people will keep self-restraint to postpone the buying of that product.
The monopoly firm to increase the customer base or market share can adapt the method of price discrimination. But the problem is that by reducing the price even if it can fetch more customers, but as existing customer, who are paying more for the same product will be paying at reduced price leading to less revenue collection from existing customers. In the above process reducing price will not increase revenue in proportion to increasing number of customers. Besides monopoly firm the oligopoly firms can also adopt price discrimination policies to increase their revenue and customer base
So firm can design a policy where the existing customers can keep on paying the price they were paying, while new customers will be paying at reduced price for the same product and services with minor changes in positioning in term of packaging, advertising and timing.
On Basis of Image:
Same product can be packaged differently and can be priced differently basically product like perfume can be packed differently and can be priced differently as gift item. The same perfume bottle which actual cost may be of 5 dollars can be packaged intelligently to price them as most valuable gift product and can be charged 50 dollars and high age technology product where people feel high price means high quality and status symbol can be charged differently with slight changes in color, packaging and designing. Examples: electronics products, garments, jewelry and other luxurious products.
On Basis of Time :
Airline industry may charge differently as per time of reservation, reservation for same tickets in two months advance may be lower than the price before one month before departure date. Similar strategy can be adopted by many service industries to push the customer to avail the service during the slack hours. Example: Mobile telecommunication services during the nighttime, hotels booking, theater entertainment, etc.
On Basis of Place:
Same books priced low in Asian countries than developed countries, Foods and oil prices are different in different state and place, as it happened for petrol price on basis of different city-state and countries. Distance from point of production, rental charges, raw material charges leads to price differences on basis of cost of production.
On Basis of Age and Gender:
On basis of age, Railways, Airline price differently, offering discounts to aged people above sixty or children below 10. To empower the girl students, the educational institution may charge differently for girl students with scholarship.
Position or Place of Sitting :
In any sports ground or cinema theater looking into different seat position price can be different for front and rear seats.
May be on Govt Policies: Tax Holidays:
Daman, Silvasa, and Goa are the union territories in India, as they avail tax relaxation for promoting industries and business; they sell the same product at lower rate than the other areas.
Power of Bargaining by Buyers:
Vegetable marketers price differently for rich and poor. Any roadside seller sell on basis of bargaining ability of the buyers. They charge differently looking into the paying ability of the customers, economic status, ignorance, etc of a buyers .
Academic Fees: College charge different fee looking into student's career, caste and paying ability. Many students avail scholarship during their education.
Rejected, Defect Products Discount Sale: Reebok and Bata price same shoes differently on basis of product condition and product defects.
On Basis of Different Channels: Firm may charge differently may be through direct channels through Internet as Dell used to do for selling computers, Home shopping through TV like Asian Sky shop, through vending machine or through dealer distributor network.
Loyalty Discount: Many retailer or airline industry offer price discount on basis of loyalty of customers which is measured on basis of frequency of flying, buying or volume of business transaction one carry out within particular period of time.
Employee Discount: Many firm offer employee discount to their own employee to purchase company product at reduced rate.
Price Discrimination Strategy by Monopoly or Oligopoly Firms:
In the monopoly kind of competition a single player dominate the market in term of the pricing, still that does not mean people are forced to buy the product, as long as people can afford to buy and feel it can fulfill their need and it is worth value for money people will buy otherwise people will keep self-restraint to postpone the buying of that product.
The monopoly firm to increase the customer base or market share can adapt the method of price discrimination. But the problem is that by reducing the price even if it can fetch more customers, but as existing customer, who are paying more for the same product will be paying at reduced price leading to less revenue collection from existing customers. In the above process reducing price will not increase revenue in proportion to increasing number of customers. Besides monopoly firm the oligopoly firms can also adopt price discrimination policies to increase their revenue and customer base
So firm can design a policy where the existing customers can keep on paying the price they were paying, while new customers will be paying at reduced price for the same product and services with minor changes in positioning in term of packaging, advertising and timing.
On Basis of Image:
Same product can be packaged differently and can be priced differently basically product like perfume can be packed differently and can be priced differently as gift item. The same perfume bottle which actual cost may be of 5 dollars can be packaged intelligently to price them as most valuable gift product and can be charged 50 dollars and high age technology product where people feel high price means high quality and status symbol can be charged differently with slight changes in color, packaging and designing. Examples: electronics products, garments, jewelry and other luxurious products.
On Basis of Time :
Airline industry may charge differently as per time of reservation, reservation for same tickets in two months advance may be lower than the price before one month before departure date. Similar strategy can be adopted by many service industries to push the customer to avail the service during the slack hours. Example: Mobile telecommunication services during the nighttime, hotels booking, theater entertainment, etc.
On Basis of Place:
Same books priced low in Asian countries than developed countries, Foods and oil prices are different in different state and place, as it happened for petrol price on basis of different city-state and countries. Distance from point of production, rental charges, raw material charges leads to price differences on basis of cost of production.
On Basis of Age and Gender:
On basis of age, Railways, Airline price differently, offering discounts to aged people above sixty or children below 10. To empower the girl students, the educational institution may charge differently for girl students with scholarship.
Position or Place of Sitting :
In any sports ground or cinema theater looking into different seat position price can be different for front and rear seats.
May be on Govt Policies: Tax Holidays:
Daman, Silvasa, and Goa are the union territories in India, as they avail tax relaxation for promoting industries and business; they sell the same product at lower rate than the other areas.
Power of Bargaining by Buyers:
Vegetable marketers price differently for rich and poor. Any roadside seller sell on basis of bargaining ability of the buyers. They charge differently looking into the paying ability of the customers, economic status, ignorance, etc of a buyers .
Academic Fees: College charge different fee looking into student's career, caste and paying ability. Many students avail scholarship during their education.
Rejected, Defect Products Discount Sale: Reebok and Bata price same shoes differently on basis of product condition and product defects.
On Basis of Different Channels: Firm may charge differently may be through direct channels through Internet as Dell used to do for selling computers, Home shopping through TV like Asian Sky shop, through vending machine or through dealer distributor network.
Loyalty Discount: Many retailer or airline industry offer price discount on basis of loyalty of customers which is measured on basis of frequency of flying, buying or volume of business transaction one carry out within particular period of time.
Employee Discount: Many firm offer employee discount to their own employee to purchase company product at reduced rate.
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