Segmented Pricing - Meaning & Definition

Published by MBA Skool Team, Last Updated: May 28, 2012

What is Segmented Pricing?

Segmented pricing is said to be done when a company fixes or sets more than one price for a product, irrespective of its production and distribution costs being the same.

Price Segmentation can happen in the following ways:

  • Seasonal Pricing: Hotel rooms cost more during peak seasons and holidays than the normal days.
  • Product/ Service characteristics: In trains, the cost of a reservation in the Sleeper Non-A/c compartment is lower than that of a First Class A/C compartment.
  • Geographical Locations: In areas or regions where the customers are less price sensitive, the prices of products are higher and vice versa.
  • Based on perceived value and customer segments
  • Discounts are given for large/bulk orders. Also offering a product package or a bundle could reduce the cost. For example, a standardised Chinese meal combo could have a soup, starter, rice and noodles for say Rs.150. But, individual items on the menu, on ala carte could be priced differently.

Segmentation must be done keeping in mind the cost parameters. Further, the perceived value of the product must be constantly assessed and it must be ensured that the image of the brand doesn’t get degraded at any stage due to this activity.

Hence, this concludes the definition of Segmented Pricing along with its overview.

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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