Multiple Pricing

Published by MBA Skool Team, Last Updated: January 22, 2018

What is Multiple Pricing?

As the name suggests, multiple pricing refers to the practice of offering more than one price for the same product. The supplier charges different prices based on:

• Ordered Quantity

• Type of customer

• Delivery time

• Payment terms etc.


Although this is sometimes not ethical, many suppliers do follow this approach to improve profits. The basic idea is to make the best offer that the consumer doesn’t refuse. By offering a spectrum of prices, companies can serve a more diverse customer segment and maximize their profits.


For example, small-time fruit and vegetable vendors often offer different prices for different quantities bought- e.g. 2 guavas for Rs. 10, 5 guavas for Rs. 20. This is done to incentivize consumers to buy more of the product. Similarly, in flea markets, the vendors don’t have display prices for most products and charge customers based on their perception of their willingness to buy or propensity to spend. Tourists are often charged more because they are not aware of the actual value or price.


Also consider the example of Amazon that offers different shipping costs based on delivery time. It offers same day delivery at a higher price than standard delivery.


Multiple pricing can also refer to use of several display prices for the same good. According to laws and regulations, if a business has more than one price on display for the same item, it must sell the products at the lower price or withdraw those products from sale.

 

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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