The Filter^: Price discrimination
We quickly agreed that so long as I only fill up when my tank is nearly empty, I should always use the points available. In other words, there is no advantage in strategically holding on to my points. This was what I had been doing, and the exercise was mostly just a nod to the serious economics geeks who have befriended me on the social network. What concerned me, however, was that some people — presumably fans of Austrian economics — thought there was something fishy in the whole concept of price discounts.
- last minute travel deals from london uk?
- The case for charging rich and poor shoppers different prices;
- sheer blonde coupon;
- midas exhaust coupons.
- plenty training coupon;
In the present article I want to explain the standard economic rationale for coupons, senior-citizen discounts, and other forms of "price discrimination. Some of the participants in the Facebook discussion were wary of the store's program.
Mises Daily Articles
They argued that if my shopping at the grocery store allowed me to get cheaper gas, then the store was either charging too much for groceries or was charging everybody else too much for gas. In other words, the cynics thought that clearly the store wasn't giving me the discount out of altruism, and so somebody else maybe me must have been the one really "paying" for my cheap gas. Despite the trivial example, the whole episode underscores two themes in free-market economics that at first appear contradictory. On the one hand, economists often cynically point out, "There ain't no such thing as a free lunch.
On the other hand, free-market economists going back at least to the classicals have stressed that social cooperation is a win-win scenario. The classical economists demonstrated that the mercantilists were wrong when they viewed their own nation's prosperity as a threat to all other nations, and vice versa. The principle of comparative advantage perhaps inaccurately attributed to David Ricardo and Bastiat's eloquent description of Economic Harmonies illustrate the theme that the presence of a "winner" in an economic transaction does not imply that there must be a corresponding "loser" out there.
How then to classify my grocery store's practice of offering cheap gas, or more generally the phenomenon of price discounts? On the one hand, we should indeed be cynical and realize that the businesses aren't showering the community with "free" gifts; the businesses are definitely getting something out of the practice. On the other hand, the positive-sum outcomes ubiquitous in market transactions should remind us that the businesses' gain needn't come at the expense of others in the community. Many of the apparent puzzles in business pricing behavior fall away once we take into account two empirical facts: First, people are different when it comes to their willingness to buy more or less of a good at various prices.
In jargon, economists say that different consumers have different demand curves or schedules for various products and services. Second, business owners initially don't know this information about the buying proclivities of their potential customers. If a business only charges a single price to all of its customers, then — disregarding nonpecuniary motivations — the business tries to set the price in order to maximize monetary profits. The problem is that this one-price-fits-all policy will probably leave many potential win-win exchanges "on the table. If he charged more than that, his sales would decline such that his total profits would go down, even though he would make a higher profit per beer.
One of the reasons for this is that price discrimination can create negative publicity. There has been no additional value provided and from the customers perspective, no additional costs incurred for delivering it. Ways around this are to keep the headline price fixed and vary benefits and offers instead. Coupons for example provide a means for retailers and manufactures to lower the price for those customers who are sensitive to it and yet maintain the premium for those who are not.
Loyalty points are obviously another key mechanic in positive price discrimination in that the same price is paid for the goods, but customers are given different levels of deferred discount as expressed through loyalty points depending on their membership of the programme and potentially their tier. From a customer perspective, loyalty points are not seen as a cost or as part of the price they pay, they are seen as a reward.
- Price Discrimination?
- Price Discrimination!
- Ethical Issues with Pricing.
- pakistan deals with russia?
- phils pizza doro coupons;
- trimpers rides ocean city coupons;
- mardan palace cheap deals?
Increasingly though, where real value can be achieved for a retailer is through a combination of loyalty and coupons. Using customer purchase behaviour derived from the loyalty programme allows for targeted couponing to reward and shift individual consumer behaviour. The sticker price stays the same, but price discrimination on a customer by customer basis is alive and kicking.
As recent article in Forbes magazine discussed the emergence of individualised coupons and how they enable price discrimination saying For ecnomists, price discrimination creates an almost perfect market where every customer gets the product they want for the price they feel it is worth.
Recommended for you
There is nothing wrong with treating different customers differently and there is nothing wrong with recognising those customers who add more value to your business. Whilst nothing is perfect and some would argue that rewarding one group is done at the expense of another, using loyalty in combination with targeted offers provides a powerful way for retailers to maximise margins, recognise customers and change consumer behaviour.
Save my name, email, and website in this browser for the next time I comment.
Notify me when new comments are added. Leave this field empty. Conversational Commerce Conference-New York.
- coupons for hucks harbor.
- Department of Economics!
- riverside pizza coupon code.
- The Economics of Coupons and Other Price Cuts | Mises Institute.
- bealls florida coupon print.
Customer SuccessCon Berkeley There are five events per year, each limited to no more than attendees. For information, please visit www. Combining his own professional experiences working as a CEO with his extensive research and expertise as an international authority on customer relationships, author Bob Thompson reveals the five routine organizational habits of successful customer-centric businesses: Listen, Think, Empower, Create, and Delight.
It is designed to deliver best practices, insights from thought leaders, and inspiring idea exchanges for customer, employee, and patient experience experts.