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At cinemas, moviegoers sitting next to each other often paid different prices. Movie theater’s differential pricing tactics include: regular price, student discount, senior discount, coupon (e.g., Entertainment Book), passes bought through another distribution point (e.g., 4 pack passes sold at Costco), and implicitly reduced prices garnered by being a member of the theater chain’s frequent moviegoer program.
Seven Differential Pricing Tactics.
Characteristics: Different prices based on characteristics like age, organization affiliation, and gender. For example, government employees often receive special “government rates.”
Hurdles: Different prices based on hurdles such as sales, club membership, size, and other conscious actions. For example, at annual customer appreciation sales, price conscious customers start lining up at 6 AM to purchase the best sale items.
Time: Discounting a product over time capitalizes on customers willing to pay premiums to have the product immediately as well as those with lower valuations that are willing to wait for discounted prices. For example, at the beginning of the season, summer clothes are sold at full price but are gradually discounted as the season progresses.
Quantity: lower prices can be used as an incentive for customers to purchase larger quantities. At one time or another, haven’t most of us succumbed to the temptation of buying a larger size because of its better value?
Distribution: Different prices can be charged based on where customers make purchases. For example, prices can be higher at Gucci’s Beverly Hills, California store on Rodeo Drive and lower in its Seacacus, New Jersey outlet store.
Mixed Bundling: Selling products both individually and in discounted bundles can enable you to charge different prices to different customers. For example, McDonald’s implicitly sells its Big Mac at a lower price to customers that purchase it as part of a Value Meal compared to those that individually purchase a Big Mac.
Negotiation: Individually negotiating with customers can lead to charging different prices for the same product. For example, car sales people often enquire about where you live, your profession, what other cars you are looking at, and how quickly you need the car. These questions are more than friendly chit chat. On the contrary, these experienced sales people are trying to determine this highest price you are willing to pay.
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