Price Segmentation: The Definitive Guide (Top Strategy Examples)

As consumers, we all buy goods and services based on a multitude of factors, including price.

Consciously or subconsciously we decide that a given price is worth paying for a product or service and the transaction takes place.

But most of us don’t realise that often we get charged not based on the value or the product or service but based on who we are and what we’re prepared to pay.

The same business may charge others less for the same solution because of their circumstances or attitudes.

This is the price segmentation strategy in action and in this article you’ll learn why it’s important and how you can use it.

As consumers, we all buy goods and services based on a multitude of factors, including price.

Consciously or subconsciously we decide that a given price is worth paying for a product or service and the transaction takes place.

But most of us don’t realise that often we get charged not based on the value or the product or service but based on who we are and what we’re prepared to pay.

The same business may charge others less for the same solution because of their circumstances or attitudes.

This is the price segmentation strategy in action and in this article you’ll learn why it’s important and how you can use it.

What Is Price Segmentation? (Modern Brand Example)

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What Is Price Segmentation?

Price segmentation is a strategy used by brands to charge different prices to different market segments for the same or similar products or services.

Although the solution of a brand has the potential to serve many market segments, often the pricing of those solutions disregards some of those market segments.

This means that because of their rigid pricing strategy, they’re leaving money on the table and hindering their growth opportunity.

Price Segmentation Examples

Price segmentation is nothing new and it’s a strategy that’s been used for generations.

You see this strategy in action in both product or service industries across, entertainment, fast-food and even software.

 

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Adobe Pricing Segmentation

Adobe is a creative software company who understands the importance of software adaptation.

As any designer knows, when you learn your creative craft using a certain type of software, you’re far more likely to continue using that software throughout your professional career.

That’s why Adobe offer students significantly reduced pricing. 

They offer an incentive for students to learn their skills using their software in the knowledge that these students will become professionals with the means to pay full price for their service. 

Pros & Cons Of Pricing Segmentation

Pricing segmentation, like any other strategy needs careful consideration to the advantages and disadvantages of using it.

Some brands are better placed to take advantage of it than others while some markets have less defined segments to benefit.

Advantages

Advantages

Some of the most valuable price segmentation advantages include:

Increase revenue and profit

Increased reach and market share

Flexibility for differentiated marketing

Broader appeal and growth potential

Disadvantages

The price segmentation strategy is not without risks and some of the major disadvantages include:

Avoidance and dilution:
Where identify the strategy and find ways to work around it

Inequality & Distrust:
When customer become aware that some market segments have paid less for the same solution, they may feel deceived leading to loss of trust and customer base.

Internal Confusion:
Any price segmentation strategy should be developed on the clarity of the market segment and the processes for pricing.

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Types Of Pricing Segmentation

There are many different ways to segment your market by price or to create a variety of prices around your offering.

These examples can be used individually or they can be combined for more creative pricing strategies.

8 Types Of Price Segmentation (Top Examples)

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Bundle Pricing:

This strategy allows brands to identify market segments and adjust their offering and price to appeal to each segment.

For example, an “essential” bundle would enable a business to remove unnecessary items from their offering to reduce the price, while adding value adds and an extras to increase the price.

In this circumstance, the core offer (and bulk value) doesn’t usually change.

Value-Based Pricing:

With this type of price segmentation, the price changes based on the value of the product or service to the customer.

This is commonly found in creative services.

Where the value of the work provided is higher to larger businesses with more customers, reach and revenue than a smaller business, the price of the work is charged at a higher rate.

Channel Pricing: