VISHWA VISHWANI INSTITUTE OF

SYSTEMS AND MANAGEMENT

SEGMENTED PRICING

PRESENTED BY:
TEAM-6
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 What Is a Price?
• The amount of money charged or paid for a
product or service.

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 Price Adjustment Strategies
• Discount and allowance pricing
• Price discrimination (Segmented pricing)
• Psychological pricing
• Promotional pricing
• Dynamic pricing

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SEGMENTED PRICING

Selling a product or service at

two or more prices,where the
difference in prices is not
based on differences in costs.

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• A segmented pricing strategy uses two or more
different prices for a product, even though there
is no difference in the item’s cost.

• This strategy can help optimize profits and

compete more effectively.

• Also called revenue or yield management.

• Certain conditions must exist for segmented pricing to be

effective.

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• Revenue management may also be defined as the
use of differential pricing based on customer
segment, time of use, and product or capacity
availability to increase supply chain profits

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• Price segmentation (offering different prices to
different market segments) increases overall
revenues and profits.

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• As an example, imagine that your business only offers
one product priced at $5.  But some consumers are
willing to pay up to $8.  You are leaving $3 on the
table for each of them.  Other consumers are more
price-sensitive and only willing to pay $3.  You do not
get any of their business. With price segmentation
more revenue  is generated by offering three prices --
$3, $5 and $8 – instead of just one -- $5.

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 Market Segmentation
Characteristics
• age
• gender
• geographic location
• income
• spending patterns
• cultural background
• demographics
• marital status
• education
• language
• mobility

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 Segmented Pricing Strategies

Four factors can help marketers use segmented pricing

strategies:
• Buyer identification: Some buyers are more price-sensitive
than others.
• Product design: Different product styles may be more in
demand.
• Purchase location: Some areas have higher prices than others.
• Time of purchase: Demand for products and services rises at
certain times.

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Copyright © Wondershare Software
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 CUSTOMER SEGMENTED PRICING

• Different customers pay different prices for the same

product or service.

• Some buyers are more price-sensitive than others.

• Charging different prices to different buyers based on

observable characteristics that signal buyers' price sensitivity.

• e.g. museums charges different rates for children,

students, adults, and senior citizens.

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 PRODUCT FORM PRICING
• Different product styles may be more in demand.

• When different versions of the product are priced

differently but not according to differences in cost.(NOT
HAVE MUCH DIFFERENCE)

• Ex: An ordinary stand fan may be sold for P400. The

same stand fan which has an added feature, say, a timer
which costs P120 to install may be sold for P1,500.

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 LOCATION PRICING
• Different locations are priced differently even though the
cost of offering each location is the same. e.g. Movie
houses, BALCONY SEATS
• Charge higher prices at places where less price sensitive
buyers purchase
• Price sensitive and price-insensitive buyers naturally
purchase at different locations or…
• Insensitive buyers will not change purchase location to take
advantage of the price difference

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 Segmenting By Volume Or Purchase Quantity

• When price segments differ in the quantities they buy,

charge different prices for different quantities

• Ex: This is usually done depending upon quantities

ordered. They have the normal wholesale price per article,
and then offer discounts of say 2.5% on quantity below 10,
5% for orders of 10-100, 7.5% for orders of 101 - 200, and
10% for orders over 200.

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 TIME PRICING
• Demand for products and services rises at certain times.
• Charging higher prices at times when less price sensitive
buyers naturally purchase, and charge lower prices at times
when it would be inconvenient for them to purchase.

• There must be a natural difference in time-of-purchase

patterns for different segments of buyers.

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 TIME PRICING
• Price of a certain product varies according to the
time or season of the year

• EX: Higher hotel room rates for holidays and other

peak tourist seasons

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Segmenting By Product Bundling

Selling different products either as an indivisible

bundle, or only at higher prices if separated

• Buyers must differ in their relative valuations of

the bundled goods.

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 Examples

Salido’s Salad and Sandwich Shop

The local outlet of a fast food chain charges $2.60 for a salad
from its salad bar if ordered a la carte. When ordered with a
sandwich, however, the salad bar costs only $1.99. In either
case, the customers are permitted to fill their bowls just once

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 Smart Steak House
A fancy steak house in a shopping mall offers a 20%
discount to employees of other stores in the mall,
provided that they eat before 6:00 PM or after
8:00 PM

– Can you explain the rationale for this strategy?

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 Delicious Deli
A deli in a college town has an interesting pricing
strategy for students. The dinner specials at the
restaurant are normally $4.95. Students, however,
can buy weekly "meal tickets" that give them three
meals for $13.90, 5 meals for $22.25, or seven meals
for $29.90. The tickets expire at the end of each
week and they are not transferable

– Can you explain this pricing strategy?

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The Importance of Segmented Pricing

• Designing an optimal price structure that effectively

segments your market and maximizes your profitable sales
opportunities is clearly among the most difficult aspects of
pricing strategy.

• This types of segmentation tactics discussed can serve as a

guide to separating markets, finding a basis for
segmentation (i.e., a particular buyer characteristic or a
particular bundling combination) ultimately requires
creative insight.

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 Price Adjustment Strategies

Conditions Necessary for

Segmented Pricing Effectiveness
• Market is segmentable • Pricing must be legal
• Segment must show • Costs of segmentation can not
different degree of exceed revenues earned
demand. • Segmented pricing must reflect
real differences in customers’
perceived value
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