Charging different customer groups different prices captures willingness-to-pay systematically — provided segment separation holds.
What it is
With price discrimination, a provider charges different prices to different customer groups for identical or near-identical offerings. Separation criteria are time, region, quantity, customer status or sales channel.
How it works in practice
- Transport: rail tickets vary by booking time, weekday and loyalty status.
- Software: student and education licences are cheaper than business versions.
- Industry: volume discounts and tiered conditions segment large customers from spot buyers.
What customers gain
- Access to products that would otherwise be out of reach.
- Ability to gain advantages by adjusting behaviour (booking time, volume bundling).
- Specific terms for one's own situation or role.
What providers gain
- Higher revenue capture along the willingness-to-pay curve.
- Better capacity utilisation in transport and service businesses.
- Differentiated channels without brand dilution.
Where to be careful
- Arbitrage: weak separation criteria lead to resale between segments.
- Perception: customers in the higher-priced segment perceive discrimination as unfair.
- Law: discrimination based on protected characteristics (gender, origin) is not permitted.
When does the method fit?
Price discrimination works when you have clear, hard-to-circumvent separation criteria and the willingness-to-pay of your segments differs measurably. Without robust segmentation mechanics, it quickly becomes discount chaos and sales conflict.
Andreas Stauber
Founder & Managing Director, Resilient Value GmbH