Question 1

 11. Prices also differ by region, this is still price segmentation.

Correct answer: True

Question 2
 3. Price segmentation is only used for products that are not the same.
Correct answer: False

Question 3
 14. Location pricing is also used by airlines and hotels.
Correct answer: True

Question 4
 7. Identifying the lifestyle of buyers is called behavioral segmentation.
Correct answer: False

Question 5
 9. Banks also use price segmentation, but only by region.
Correct answer: False

Question 6
 12. Buyers who frequently buy the product is a behavioral segmentation.
Correct answer: True

Question 7
 1. Price segmentation is usually used by airline companies.
Correct answer: True

Question 8
 15. Product form pricing is a common segmentation by car companies.
Correct answer: True

Question 9
 6. Price paid by seniors and students is an example of price segmentation.
Correct answer: True

Question 10
 4. When customers are segmented separately, this is for the purpose of price
segmentation.
Correct answer: True

Question 11
 8. Grouping buyers by age is part of psychological pricing.
Correct answer: False

Question 12
 5. Research cannot actually determine the willingness of the consumers to pay for
certain products.
Correct answer: False

Question 13
 13. The buyers' social status is part of demographic segmentation.
Correct answer: False

Question 14
 10. For potential customers, those who have enough purchasing power, lower prices
are offered to gain more customers.
Correct answer: False

Question 15
 2. Restaurants are not allowed to segment their price because they are a food
business.
Correct answer: False

Question 1
 15. Products are generally bundled to increase the company's revenue.
Correct answer: True

Question 2
 11. It is recommended to free up the warehouse space by product bundling.
Correct answer: True

Question 3
 4. An inventory clearance bundling means;
Correct answer: pairing the fast moving with the slow moving

Question 4
 13. Gifting bundles are only recommended for food items.
Correct answer: False
Question 5
 3. This is an example of a cross-sell bundle;
Correct answer: coffee and coffee mate

Question 6
 2. Reasons for product are bundling are the following except;
Correct answer: to hold slow moving products

Question 7
 9. Gifting bundle is an example of a mix and match bundle.
Correct answer: False

Question 8
 8. Using the mix and match items can be an attractive bundling strategy.
Correct answer: True

Question 9
 6. Usually bundled items are those that belong to the same product line.
Correct answer: True

Question 10
 10. It is not advisable to bundle the newly launched product.
Correct answer: False

Question 11
 5. Merchandise that doesn't get sold which only add to holding cost is termed as;
Correct answer: dead stock

Question 12
 7. The bundled complementary items are those items that can take the place of the
other items.
Correct answer: False

Question 13
 12. Inventory clearance bundling sell the most compared with the other product
bundling.
Correct answer: False

Question 14
 14. The buy-one-get-one bundling is an example of mix and match product bundling.
 Correct answer: False

Question 15
 1. Products that are usually bundled are the;
Correct answer: complementary products

Price Segmentation and Bundling

I.  Segmentation Pricing
 
Segmented pricing is a situation, when seller or a company establishes different
prices (two or more), for one the same product. Even if product have various costs, it do not
have influence for different prices determined by enterprises.

Segmented pricing is also called “price discrimination” . Segmented pricing, is more

productive if it exist segmentation on the market, or perceived value of product in each segment,
is comparable with prices set for them, or segments have "different degree of demand" .

Price segmentation is THE MOST POWERFUL TOOL you have at your pricing toolbox. 
Every company, big or small, must be thinking about price segmentation.

What is it?  Price segmentation is simply charging different prices to different people

for the same or similar product or service.  You see examples every time you go
shopping:  student prices at movie theaters, senior prices for coffee at McDonald’s.  The
industry that probably does price segmentation better than any other is airlines.  It
seems that no two people on a plane paid the same price.

Whether you’re a retailer, restaurant, software company or building physical products,

price segmentation applies to you.

The academic literature  describes many characteristics and requirements for price
segmentation, but in reality, there are only 2 steps to implement it:

1.  Segment the market – The first requirement is to find groups of customers, some that are
willing to pay more than others.  To keep this simple, let’s hold it to 2 segments, those willing
to pay more and those willing to pay less.  Let’s call them the “rich” and the “poor”. This is a
pretty common segmentation anyway.  In general poor people are more willing to invest time,
energy and effort to get low prices, while rich people are more likely to just buy what they want.
 In order for price segmentation to be successful, companies need to identify different
customer segments and separate them based on factors such as willingness to pay.
Businesses can segment their customers into groups such as people who are full-time
university students and those who aren't. Depending on how the segment has been
defined, those who aren't full-time university students will be willing to pay more for a
product that those who are full-time university students because they have more money
to spend on a particular product or service. 

Using market research, one can determine that different segments have different
demand curves and willingness-to-pay
 

2. Create a pricing mechanism – This is much harder than it seems.  You can’t simply put up a
sign in your store that says “Rich people – P 100;  Poor people – P50”.  Nobody would ever
confess to being rich. You need a way to get the rich people to voluntarily pay the higher price.

The best way to learn price segmentation is to go through examples.  Let’s look at
students at the movie theater.  The movie industry has determined that most of us (non-
students) are the “rich”, and students are the “poor”.  This may not be perfectly true, but
in general it would be fair to say that students who don’t have full-time jobs are less well
off than those of us that work for a living.  However, the movie industry still wants them
to come to the theaters so they want to charge them less.  The way they do this is to offer
a discount to students, and in order to get the discount, you have to show a student ID. 
That way most of us pay the normal price and students get a lower price.

Let’s broaden this a little.  Showing a student ID to get a discount at the theater is an
example of a broader type of price segmentation:  ID for discount.  This is used in other
ways as well, like when seniors show an ID for a discount.

Action:  How can you ask for an ID to give a discount?  Will seniors or students pay less

for your product service?  If no, begin thinking of other price segmentation methods you

may be able to use.

 

Forms of segmented pricing

 Segmented pricing have four different forms:
1. Customer-segment pricing
2. Product-form pricing
3. Location pricing
4. Time pricing
5. 1.   Customer-segment pricing, it is a form where, price is depend on customer
segment. For example, age might be used to set different ticket prices (students, seniors),
or depending on region, the product price might be not similar.

Marketing distinguish several types of segmentation:

 Demographic segmentation (age, gender, family size)
 Geographical segmentation (region, population destinity)
 Psychological segmentation (social class, personality characteristic)
 Behavioural segmentation

2. Product-form pricing, it is a form where, the price is depend on different version of

the same product, which comes from the same source. 

3. Location pricing, it is not only a region which customer comes from, but it might be
location in cinema, airplane or theatre. The most popular or the best locaton have the highest
prices. The price is various, “even if costoffering for every location is the same”. 

4. Time pricingit is a form of segmented pricing, where price is depend on the month, the day,
the season, or the hour. For example, in weekends, ticket price in cinema is higher than on other
days of the week.

HOW TO EFFECTIVELY IMPLEMENT PRICE SEGMENTATION

STRATEGIES
Price segmentation involves charging different prices to different customers for a
product or service that is the same or similar. It is a strategy that is very common as
customers will face different prices when going to cinemas or when using vouchers in
different shops. The airline industry uses price segmentation effectively all the time as
customers rarely pay the same price for a particular seat.

Imagine a product costs P25, some customers may be willing to pay more while some
others may find that price to be too much. Firms lose money from customers who won't
purchase the product at that price as well as losing money from customers who are
willing to pay more. If that company were to segment that price into three
categories, P20, P25, and P30, then it can appeal to customers looking for a cheaper
product as well as extracting that extra revenue from the customer segment that were
willing to pay more for their product. 

 Back to the example with the airlines- a single airplane seat has a variety of different
price tags attached to it. The seat is the same to the different customers looking to
purchase it but that price varies depending on the customer looking to make the
purchase. Customers can be segmented for reasons such as volume, service offering,
time of purchase, and location. 

Examples of price segmentation

Volume: This form of price segmentation occurs when customers are charged for a
lower price per unit. Fitness gyms for example offer customers the chance to pay
for monthly and fixed term memberships. Even though they vary, some customers may
prefer a three-month membership over a six or nine-month membership for a variety of
reasons and that segmentation allows this business to appeal to a more diverse group of
customers. 

Location: Tickets at concerts and sports events get more expensive the closer they are
to the stage/court. A customer may be willing to pay much more if it means they get to
be close to the action. On the other hand, a customer who is further away from the stage
may only be concerned about being able to spectate. 

Time of purchase: This can be seen frequently in the fashion industry. Customers

who want to look fashionable will be willing to pay a premium to have articles of
clothing that are in season. On the other hand, customers who may not want to pay that
much will wait for the end of season sale where the same pieces of clothing are much
cheaper. 

Service offered: Train companies will offer their customers tickets that can be
refunded or non-refunded. Customers may be happy to pay much less to pay for a non-
refundable ticket but the trade-off is that they cannot get it refunded should there be a
change in travel circumstance for the customer. 

I. Bundle Pricing Strategy

In a bundle pricing, companies sell a package or set of goods or services for a lower
price than they would charge if the customer bought all of them separately. Common
examples include option packages on new cars, value meals at restaurants and cable
TV channel plans. Pursuing a bundle pricing strategy allows you to increase your profit
by giving customers a discount.

Based on Consumer Surplus

Bundle pricing is built on the idea of consumer surplus. Every customer has a price
that he is willing to pay for a particular good or service. If the price you set is equal to
or lower than what the customer is willing to pay, the customer will buy, as he
considers the price a bargain. The difference between what the customer pays and
what the customer was willing to pay is known in economics as the consumer surplus.
Bundle pricing is an attempt to capture more of your customers' consumer surplus.

Personalized Pricing
An example: Your car wash offers two services, exterior cleaning and interior cleaning.
Using market research and your own experience, you've concluded that there are two
primary groups of customers. Those in group A are concerned about appearances and
are willing to pay up to P15 for the exterior package but only P8 for the interior.
Members of group B are less appearance-oriented, but they value comfort; they're
willing to pay P10 for the exterior package and P9 for the interior.
If you were able to charge everyone exactly what they're willing to pay, you could get
P23 from each customer in group A and P19 from each in group B, for a total of P42
from a pair of A and B customers. With personalized pricing, there would be no
consumer surplus.

Bundling Benefit
If you have no reliable way of telling whether customers are in group A or group B
when they come in, personalized pricing is impossible. In a bid to get each customer to
buy both services, you'd charge P10 for exterior and P8 for exterior, as each group is
willing to pay that amount for each service. Each customer would produce P18 worth
of revenue, for a total of P36 from a pair of A and B customers. The consumer surplus
in this case is P6. Look again at what each customer is willing to pay for the two
services: P23 in group A and P19 in group B. If you set an interior-exterior bundle
price of P19, you'd make P38 per A-B pair, capturing P2 of consumer surplus.

 Ways Product Bundling Can Boost Sales

We’ve all done it: ordered a combo meal at a fast food restaurant because it was just
simpler to ask for a “number five,” or put more items in our shopping cart than we really
needed because there was a “buy two, get one free” promotion. Product bundling is a
smart way for businesses to increase sales, and it works just as well (or better) online as
it does in brick-and-mortar stores.
E-commerce businesses generally have a lot more information about prospective buyers
than typical retailers. This enables them to personalize landing pages and offers.
Without the constraints of shelf space in a typical retail store, e-commerce businesses
can offer customers a nearly infinite variety of items. However, too many options can
quickly overwhelm shoppers. Product bundling simplifies the purchasing decision for
first-time buyers and makes it easier for savvy marketers to upsell complementary and
related products.
We’re all very familiar with cases of successful product bundling—just consider software
bundles like  Microsoft Office and Adobe Creative Cloud. Then there are companies that
use e-commerce to sell bundles like  Play! by Sephora, The Running Buddy, and Nic
Harry. Practically every cable and internet service provider successfully sells
bundles, such as Comcast and AT&T. These brands have put bundling at the heart of their brand
story, and they back it up with marketing strategies and systems that are fully aligned to deliver on
the benefits of bundling for their customers.
Yes, product bundling has the potential to be a compelling transformational strategy, especially when
combined with a simple and emotional brand story. But sometimes, it can backfire on you. Just
consider the story of Nintendo Game Boy, and how they discovered that customers actually value
bundles of products less than stand-alone offerings.
 

Benefits of Product Bundling

Customers are sometimes presented with bundled offerings through online ads or email campaigns.
But the most common method—pioneered by e-commerce giant Amazon—is to offer bundles at the
“add to cart” and checkout stages. Below are seven of the top benefits of  product bundling:
1. Enhance the customer experience.It gives customers an opportunity to choose products
and services grouped with their needs in mind. Then letting them remove, add, or edit
products from base bundles can make the end result even more satisfying.
2. Relieve the pressure of decision making.Shoppers like choices but become
overwhelmed when there are too many decisions to make. Top online retailers set up tailored
recommendations using sophisticated product-customer matching algorithms which direct
clients toward choices that meet their needs. This convenient tactic relieves decision
exhaustion and helps you close the sale.
3. Improve customer confidence.Customized bundling makes the shopper feel invested in
the decision and increases the likelihood of a sale. It also boosts return business rates, since
the customer is likely to return to a company that understands his or her needs.
4. Help customers understand the products better.Customers have to review each
product or set of products to decide on a bundle. This helps them understand what the
products do and the different features and benefits of each.
5. Enhance customer feedback.When customers direct their own shopping experience, you
gain insights into the selection process. Use this opportunity to find out which products or
services work, and adjust those that don’t. This constant feedback lets you tweak the
shopping experience and improve your products.
6. Increase revenue and average sales. Bundling helps you increase average order value,
an important metric in measuring business success and growth. This strategy boosts total
revenue by increasing the amount spent on each transaction. Sell bundled products to
encourage clients to spend more and make informed business decisions based on customer
preferences.
7. Speed up inventory clearance.Inventory management is a large responsibility for e-
commerce businesses. Do it right and produce bundling facilitates inventory management by
moving stock. Calculate your inventory turnover to see which items are lagging. Clever
bundling pairs consist of top selling products and less popular items with a larger inventory—
then you can set a price that increases the appeal of the new package. Another successful
strategy is to package certain quantities of a dead item at a reduced price that still turns a
profit. Offering this exclusively to those who already purchased the product in the past
increases the desirability of the bundle.

Product Bundling Tips to Boost Sales

Now that you understand the benefits of product bundles, it’s time to create your own. Follow these
steps to identify and maximize product bundling opportunities:
1. Study buyer purchase patterns.If you combine products that people already buy, you
know the bundle will likely appeal to customers.
 2. A/B test different product combinations.Experiment with different bundles to see
which offerings get the best results.
3. Bundle overstock or less popular items with hot sellers at a discounted
price.This can help you move inventory that is at risk of becoming stale. Take a look at your
lowest sellers that are still great products. But be sure to offer genuine savings. Customers
will see through it if there is no real value proposition.
4. Use your expertise to pick other products that work well together. Customers will
be grateful if you suggest pairings they might not have thought of or remind them of
accessories or important add-on items they are likely to need.
5. Allow custom bundling.Instead of just offering pre-built bundles, encourage clients to
pick and choose accessories to base bundles. This dramatically increases the average order
value. For example, if you bundle together cosmetics, such as base foundation and powder,
you can let shoppers add eyeliner and eyeshadow at checkout to complete their makeover kit.
6. Implement a ‘buy more and save’ campaign.Let shoppers save money by placing a
bigger order at a discount price. This typically increases the order quantity on future sales as
well. A smart way to implement this strategy includes a minimum spend threshold over
which a discount or tiered discount kicks in.

Make your Customer the Hero

Bundling has become the gold standard in e-commerce thanks to an increased demand
for personalized choices and shopping convenience. The good news is that it’s a strategy that
massive, global businesses and small, local entrepreneurs alike can use to boost online sales.
There are an infinite number of ways to bundle products and even more ways to build a strategy that
reflects that. So, how do you do it? Ultimately, the only way your product bundling strategy will be
successful is if you focus on making the customer the hero. Customers want to feel like you
understand their needs and frustrations. Companies that respond to that by offering thoughtful and
convenient product combinations at a discounted price end up with higher profits and happier
customers.
Done well, product bundling is a win-win that increases your revenue and keeps your inventory
moving. But remember, bundling success relies on simplicity, clarity, and alignment of your product
Story, Strategy, and Systems.