Let’s start with a definition: price discrimination, a fundamental concept in pricing theory, refers to the strategy of charging different prices to different customers based on their willingness and ability to pay.

I have a couple of problems with that. First, I hate the term ‘price discrimination’. The very word ‘discrimination’ is highly negative, and this can be a positive way to present different prices. I would much rather this had been called ‘selective pricing’ or ‘price differentiation’.

Second, saying it is about charging different customers different prices based on their willingness or their ability to pay makes this sound highly unethical, when in fact there are many ethical and rational reasons to charge different prices.

A more nuanced definition of price discrimination is that it involves creating slightly different product or service solutions tailored to various customer segments. Then pricing these solutions differently based on the distinct value they offer and the varying costs associated with delivering them.

Commercial market

Let’s look at commercial (or B2B) markets first.

The most obvious price discrimination method, and one that many of us experience, is volume discounts. The more we buy, the less we pay. And this is where the ethics of pricing comes in.

Selling in larger volumes means lower handling costs, lower carriage costs, and probably lower input costs because the business is buying components or goods themselves in higher quantities. Some of those cost savings can be passed onto the customer, while at the same time the business can sell at higher margins. That’s a win-win – the business makes more money, and the customer buys the goods for lower per-unit prices.

Examples of B2B price discrimination include:

1. Volume discounts: Offering lower prices per unit for customers who purchase in larger quantities, as we’ve just covered.

2. ...

3. ...

4. ...

5. ...

6. ...

7. ...

8. ...

Typically, the methods businesses use to find ways to create different price solutions for customers break down into:

• Cost savings: volume discounts, geographic pricing.
• Cash management: seasonal pricing, payment terms.
• Usage: SaaS type tiers, customer loyalty.
• Certainty: contract, retainer.

So, why bother looking at whethe


To read the full article, you’ll need to have a physical copy of the magazine which you can sign up for here for 6 issues delivered to your door from just £16!

https://store.promobile.online/products/pro-mobile-magazine-6-issue-1-year-subscription

You’ll also get full interactive access to this and the last year of magazines via the Pro Mobile Magazine App which is available from both the Apple App Store and Android PlayStore