Page 132 - Marketing the Basics 2nd

124 Marketing: the Basics
GAIN AND RISK SHARING PRICING
A gain and risk sharing (GRS) pricing method is a guarantee on the part of the supplier to deliver on the promises about the product. Should the product not meet the consumer’s satisfaction, the customer can return the product and obtain a refund. Reducing the risk to the consumer makes the decision to buy a product more favourable.
PRICE DISCRIMINATION
As the name suggests, price discrimination is a method of charging different prices for the same product to different consumers. For this system to work, the producer must be able to segment the market. Second, trading between different segments is impossible. Third, competitors cannot directly compete against the producer. Fourth, consumers accept that price discrimination does occur. Fifth, the cost of segmenting and enforcing the method is less than the revenue generated. And finally, it must be legal.
Price discrimination occurs in many industries. Software compa- nies for example charge corporations a much higher fee than to individual users. Airlines steadily increase the cost of flying as the departure date nears. Many nightclubs charge different entrance fees for males and females. If conducted correctly, price discrimina- tion will result in higher revenue for the company. What we see in a number of industries is that price discrimination is becoming harder to pull off today. Widespread use of the Internet means that people are less apt to accept price discrimination. Airlines for example are beginning to move to simpler and more transparent airfare structures because of customer upset over the fact that the person beside them on the plane paid a much lower fare. The old need to stay over a Saturday night or an American on a visit to Europe having to stay for a minimum of seven days is no longer required by many airlines, it is simply not sustainable. We always wondered why European authorities would insist that North Americans must go to Europe for a minimum of seven days; were we that desperate in need for long exposure to European culture? What is much more widely known now was that it was not a government requirement but a way for airlines to get frequent travellers to pay