Differential Pricing

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Definition: Differential Pricing

Differential pricing is a type of pricing strategy in which a product or a service is charged differently based on various parameters like the customer, characteristics the quantity of product, different circumstances or mode used etc. It follows the key pricing principle that some customers are willing to pay more than others for a product as they may value the product more. The end result of a successful differential pricing is maximization of the profit by selling more products at maximum price a customer is willing to pay.

Various methods used by businesses to establish differential pricing are-

• Customer Characteristics or Demographics

• Volume Maximization (strategy to make customer buy more products)

• Coupons, rebates, sales in partnership with trade partners

• Occasion or Festival Based

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