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pricing Martin Lee on 12 Jan 2007 12:49 am

Price Targeting Your Customers (Part 2)

Continuing from where I left off from The Undercover Economist, I will continue looking at some other price targeting methods.

Previously, we looked at different versions of products that were sold at different prices.

Another way of price targeting is to sell the same product at different prices based on the region that it is sold in.

One example is the DVD market. The same DVD show sold in USA would be priced higher compared to the pricing in my country (Singapore). The same goes for academic books. Do you think that’s fair?

So now you can see many people buying things from Ebay to avoid this regional price targeting strategy (even though some companies make it illegal to do so).

Regional price targeting has become less effective with the internet.

Customers who are being offered a discount buy the products and then resell it at a profit to the customers who are being charged a higher price.

If you thought regional price targeting was unfair and products should only have one price regardless of the region, then let us look at pharmaceutical drugs.

By charging higher prices in the developed countries, pharmaceutical companies can afford to charge lower prices to poorer countries and make these life-saving drugs available to them.

If a one-price strategy is used instead, then more people in the poorer countries will not have access to these drugs, while people in the developed countries will be able to get the drugs at a lower price.

But what happens if people from these poorer countries start selling the drugs back to developed countries?

The greater price transparency brought about by the internet and other improvements in communications has this downside: a company with scarcity power may be discouraged to offer discounted products because they are more likely to leak from one group to another.

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One Response to “Price Targeting Your Customers (Part 2)”

  1. on 02 Feb 2008 at 11:41 pm 1.Jim said …

    Hi Martin,

    Yes regional pricing is very interesting. For example cars in the UK are more expensive than in other parts of Europe. At one time there was quite a grey market in people importing cars from Europe, converting them to right hand drive and selling them.

    Did the car manufacturers protest? You bet!

    Jim

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