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Is customized pricing more effective than a national strategy? | MultiBriefs

Pricing can vary as much as opinions. Sometimes, companies sell identical goods at different prices in different parts of the country.

But is this the best approach, or should retailers follow a national pricing strategy? And what factors should be considered when determining a pricing strategy?

Location-based pricing is profitable
“In theory, it is always more profitable to implement price differentiation strategies if possible,” according to Fei Gao, an assistant professor of operations and decision technologies at Indiana University’s Kelley School of Business.

Gao says that location-based pricing makes sense because people in different locations may have different preferences and/or buying power. “For example, people who live in Manhattan clearly can afford a much higher product price than many Americans who live in midsize cities or even rural areas,” he says.

However, just because you can implement price differentiation strategies doesn’t necessarily mean that you should. Gao says companies need to carefully consider a consumer’s reaction to this type of strategy. “People may get confused — and even upset — after finding out that the firm is charging them a different (especially higher) price for the same product.”

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MultiBrief: Is customized pricing more effective than a national strategy?.

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