Intuit accepts no responsibility for the accuracy, legality, or content on these sites. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. We provide third-party links as a convenience and for informational purposes only. Readers should verify statements before relying on them. does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Accordingly, the information provided should not be relied upon as a substitute for independent research. does not have any responsibility for updating or revising any information presented herein. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Applicable laws may vary by state or locality. Additional information and exceptions may apply. This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business. People who need to fly a particular route will have to pay more during peak times. Airlines use price discrimination when they use demand-based pricing to change the price of airline tickets. Price discrimination also works when you have a captive audience. Controlled, periodic testing of prices can help a company measure the extent to which customers value a product or service, or any of its features, and understand the context of when and how they derive that value. The retailer charges less for orders they ship from their warehouse because it costs less to process the request. However, Canada’s largest bookstore chain, Indigo, does the opposite. Some customers will pay a little more for the convenience of ordering online. You might offer free shipping on your website but charge more for products purchased online than you do in the store, or vice versa. Take online versus offline sales, for example. You can justify price discrimination if it presents a customer benefit. An example of this would be senior discounts or lower prices for children. Third-degree price discrimination: This is when a business charges different prices to different types of consumers.Second-degree price discrimination: This is when a business charges different prices based on quantity sold-think discounts for bulk purchases.First-degree price discrimination: Also known as perfect price discrimination, this is when a business prices each product at its maximum value.There are three degrees of price discrimination. All this leads to more profit margin, as you can see in the image below.Price discrimination (also called variable pricing) occurs when a business sells the same products at different prices through different channels. Although this practice was first found in online web shops, there are coming more and more opportunities to do this in brick-and-mortar stores or B2B sales as well. However, prices that change every day, hour or even per minute are only possible since recently. The prices of fruit in the supermarket also change depending on the season. If done correctly, the optimal price can be presented to customers at any given moment in time. Instead of offering fixed prices, prices can vary (between a certain pre-defined range if required). The relevant factors can vary based upon the industry of specific business challenges. This is all done automatically with software that automatically responds when changes happen in the previous mentioned factors. The dynamic pricing model does not only factor in supply and demand at a given price, but also other factors, such as the prices of competitors, cost, seasonality or other factors. At this pricepoint one offers a price for which the supply will sell out exactly. This pricepoint is sometimes refered to as the equilibrium. It does so by offering a price that matches the demand curve and the supply curve, to not leave any room for additional profit margin on the table. On one hand a dynamic pricing model optimizes margins and on the other hand sales opportunities. However, due to the advancements in technology, dynamic pricing is available for more and more businesess. Until recently this was not available for a lot of companies. Dynamic pricing is a relatively new concept and practice. This process automates mundane pricing adjustments by pricing managers and enables them to spend more time working on more complex challenges and tasks. Most of the time, this is done automatically by smart software and algorithms. With a dynamic pricing strategy, companies constantly adjust prices to maximize margins, conversion and profit.
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