Price discrimination — charging different prices for the same product or service — requires preventing people who pay a high price for an item from being able to buy it at a low price.
This is done by separating the markets — linking the price to different times when the item is bought, such as day or night, weekday or weekend; or different ages of customers; or other ways.
Another market separation gimmick is underscored by a squib in the latest Consumer Reports. Dr. Leonard’s catalog sells the Barber Magic hair trimmer for $12.99, but in the same catalog offers the identical product, called the Trim-a-Pet, for $7.99.
Dr. Leonard’s
Dr. Leonard’sOther than the names on the packages and a bit of different description, the products are identical; and even the styles of the packages are identical.
Putting advertisements for both packages in the same catalog is a poor way of creating market separation: If I had hair and needed to cut it, I would simply buy the Trim-a-Pet for my personal use and save the $5.
This attempt at market separation might work if done in stores — pet stores could sell the Trim-a-Pet at lower prices than drug or hair-care shops sell the Barber Magic — but without some kind of geographic separation, successful price discrimination can’t occur.
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Separation?? Not necessarily.
I guarantee you that if you put the same product next to each other one for $10 and the other for $14 but with a slight different package (even if only on silvery color) but with the same the trimmer, many people will select the more expensive one!
The reason? The believe that if it is 4$ more, it must have some king of benefit I am not aware of… He may be thinking; for only 4$ more a better choose this “better” one, just in case!!!” Besides, I am sure they may check their quality better before packaging it.
Hmm, I think you’re overestimating the a) intelligence of people and b) their willingness to buy a pet product for personal use. I don’t think people are comparing that carefully…I think a lot of people would but the ‘human’ razor merely because it’s labeled that way and they would worry there is something a little different about the ‘pet’ model. This would be ESPECIALLY true in the case of pet-vs.-salon stores! I just don’t think people are comparing that carefully, even in a catalog. It’s the same principle that you can sell name-brand stuff higher at the grocery store even if it’s the EXACT same thing as the store brand sitting right beside it!
This is a very interesting topic to me. Does anyone know of studies that shed light on the Price Discrimination tactics used by some major online stores based on your search history or prior purchases?
Edel, I work in IT for a school district & I see the behavior that you speak of all the time. I regularly see purchases of very expensive software & hardware when there are better, much less expensive options available. I’ve seen other school districts pay thousands & thousands of dollars for software that can be replaced with free software that is fully functionally equivalent & often times functionally superior. I have suggested to my peers that they are wasting money & they look at me like I’m an idiot. Fortunately, my boss thinks I’m a genius for all the money I’ve saved the district.
The same has been true for athlete’s foot spray and jock itch spray. It’s the exact same formulation but the latter commands a premium. In this case you respect your jewels more than your dogs!
I wonder if the assumption that these two products are identical, is premature. Looking the same in a catalog is not the same as being the same “for real.” You’d have to order one of each, then open them up to find out.
Note: This is not to say that I think they can’t be identical; it’s very possible they are. It’s just that possibility is not 100%.
reminds me of an experiment that the author & poet Robert Graves ran in the 1920s, detailed in “Goodbye to All That”. After WWI he tried his hand at running a grocery story. He found that if he took a single bin of lettuce and divided it into two, and placed the two bins side by side with the left bin selling lettuce for many times the price of the right bin, the genteel would by the expensive lettuce, and the working class townfolk would buy the cheap lettuce. I think that he even mentioned that the rich would balk if they didn’t have a “special” version groceries to buy, and had to buy the “common” variety.
Not everyone is as rational as an economist in price – in fact, I’d say very few people are – only economists!
But using a doggie trimmer is yucky! I let him lick my nose – and you know where that tongue has been – but I draw the line at sharing his clippers! I wish I had his coat though. Do you think using the doggie trimmers might help me grow a more luxurious coat? Maybe the marketers should have raised one of the prices and sold that non-existent differential.