Setting Price

Special Segment Pricing

In some industries special classes of customers within a target market are offered pricing that differs from the rest of the market.  The main reasons for doing this include: building future demand by appealing to new or younger customers; improving the brand’s image as being sensitive to customer’s needs; and rewarding long time customers with price breaks.

For instance, many companies including movie theaters, fitness facilities and pharmaceutical firms offer lower prices to senior citizens.  Some marketers offer non-profit customers lower prices compared to that charged to for-profit firms.  Other industries may offer lower prices to students or children. 

Another example used by service firms is to offer pricing differences based on convenience and comfort enjoyed by customers when experiencing the service such as seat location at a sporting or entertainment event. 

Geographic Pricing

Products requiring marketers to pay higher costs that are affected by geographic area in which a product is sold may result in adjustments to compensate for the higher expense.  The most likely cause for charging a different price rests with the cost of transporting a product from the supplier’s distribution location to the buyer’s place of business.  If the supplier is incurring all costs for shipping then they may charge a higher price for products in order to cover the extra transportation costs.  For instance, shipping products by air to Hawaii may cost a Los Angeles, California manufacturer a much higher transportation cost than a shipment made to San Diego.

Transportation expense is not the only cost that may raise a product’s price.  Special taxes or tariffs may be imposed on certain products by local, regional or international governments which a seller passes along in the form of higher prices.