Price Differentiation

Price differentiation is a pricing strategy that charges different segments of customers altered prices for the same products or services.

Price Differentiation Examples

    Charging different segments different prices for the same product
    Travel sites giving different users different prices dependent on when they book
    Charging a customer that is farther away more on a "free shipping item" to make up for shipping costs

Deeper Insights

Orbitz.com, an online travel agent, recently faced a price discrimination scandal by charging higher prices and displaying more expensive listings for customers accessing the site from an Apple Mac computer as opposed to a Windows PC. Orbitz adjusted their prices this way under the assumption that Mac computers are more expensive and, therefore, Mac users are more affluent.

Though this can be an effective tool to target certain types of customers, one must be weary when implementing the software because it can offend potential customers or even compromise customer privacy. When implementing any kind of price differentiation you must make sure you are not participating in price discriminiation.

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Related Keywords: Tiered Pricing, Pricing Strategy, Psychological Pricing, Perceived Value, Geographical Pricing