What is Differential Pricing?

It’s a well known fact that females get higher quotes on car repairs, compared to males. According to one study; women get almost 10% higher prices than men, when they are uninformed about the market price for a specific repair. This everyday price discrimination actually has a place in Marketing, and it’s called Differential Pricing in the corporate world.

From time to time, companies use different pricing strategies for different customer segments they have. Giving away discount codes, special deals, gift bundles are a way to introduce your brand to new customers. When targeted through a specific audience, discount codes can act as a way of Differential Pricing.

Some companies offer their products and services for cheaper prices in their customers in different countries. This is due to the perceived value of a product. For example, Spotify premium membership is $9.90 in the US, while it’s ₹150 ($2.30) in India.

Differential Pricing Strategy aims to maximize the units sold and market share, while decreases the profit margin. However, this trade off usually brings in more revenue to the company, especially when selling products with low marginal costs.

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