Price segmentation usually means charging different prices to different customers with different willingnesses to pay. However, it can also be charging the same customer different prices depending on the situation. Here’s an example.
On November 27 I had my car washed at the Car Spa. At the checkout, they gave me the coupon you see in the picture. Notice that this coupon is only good for 2 weeks from the day of the car wash.
It is very unlikely that I would get my car washed again within one week a wash and probably not even within two weeks. This means I have a low willingness to pay for a car wash shortly after having it done.
And that is what price segmentation is. Charging less to customers with lower willingness to pay. In this case, the customers willingness to pay changes in a predictable manner over time. Willingness to pay increases the longer it has been since the last car wash. This coupon takes advantage of this characteristic.
Does this concept apply to your business? Does your customer’s willingness to pay change in a predictable way? If so, you will likely be able to create a mechanism to sell more by targeting discounts during the times when willingness to pay is at its lowest.
Here are some other items that could likely benefit from this exact technique: Haircuts, manicure/pedicure, a specific restaurant. Can you think of more? If so, please share.
Mark Stiving, Ph.D.
If you haven’t done so yet, please check out my book, Impact Pricing. The reviews on Amazon are amazing (thank you to all who have written one.)