L11

Question 1

Explain price segmentation based on customer characteristics.

Answer 1

Very tricky balance from discrimination, but….

Should overweight customers pay extra?

Question 2

Explain price segmentation based on purchase quantity.

Answer 2

Using characteristics of purchase occasion rather than customer as the price segmentation fence.

> Order-sized discounts. E.g. pay 30$ instead of 35$ if you take 3 or more.
Cumulative purshase discount. E.g. Statoil bronze, silver and gold card.

Question 3

Explain price segmentation based on product features.

Answer 3

The price of the basic product differs based on whether the customer purchases a certain luxury feature.
Those that purchase the luxury feature pay a feature-dependent premium.

Two types of features:
Product-Enhancing Features
Product-Diminishing Features

Question 4

Explain price segmentation based on design of product bundles.

Answer 4

The price differs based on how a seller’s offerings are combined into product bundles.

Bundle: any set of products offered together as a package

E.g. Bundle many insurance policies together. “Giving more for less”.

Question 5

Explain price segmentation based on time of product purchase or use.

Answer 5

The prices of most products can vary over time.

Time can affect:

• When a product is used
• When a product is purchased

E.g. flight tickets are expensive for holidays and if you buy it for the next day.

=> Services are typically used by customers at the same time they are produced.

Question 6

Explain price segmentation based on place of purchase.

Answer 6

Ice cream will be more expensive in the park next to the fountain and bench than at the convenience store right outside the park.

Meal in airplane is more expensive than on land.

Question 7

What are the 6 major types of price-segmentation?

Answer 7

Customer characteristics
Purchase quantity
Product features
Design of product bundles
Time of product purchase or use
Place of purchase

Question 8

What is “fixed-charge pricing” and “two-part pricing”?

Answer 8

Fixed-charge pricing:
customers pay a single price – the more the product is used, the less the per-portion or per-use price is.

Two-part pricing:
involves both a fixed charge and a per-unit charge. The more units that are purchased, the less per-item amount of the fixed charge.
E.g. Amusement Parks that charge a fixed fee for entrance into the park and a fee per ride