How to Make Variable Pricing Work for Your Business

Pricing is one of the most under-discussed, under-utilized tools in marketing. Though it is one of the Four Ps we all learn about in Marketing 101, we too often take for granted that the price is the price and there’s nothing we can do about it.

But price is a lever we can use to improve returns in a multitude of ways. One popular strategy is the introduction of variable pricing to your product line.

Variable pricing, in the broadest sense, means offering different prices for the same products at different times, locations, or to different audiences. There are many different ways to do it, as the large number of companies that execute these strategies successfully have proven.

Below are a number of the most common forms of variable pricing, which you can apply to your business in order to get more mileage out of your existing marketing efforts:

1. Amazon famously got caught showing different prices to different users for the exact same products. Amazon and other technology-intensive companies are in a constant state of price testing. By showing different prices for the same products over millions of different site interactions, they can use variable pricing to find the price point that provides the maximum profit for each product.


2. Uber is widely derided for their “surge pricing” model, which follows the basic law of supply and demand. When more people are using the service, prices go up. You can use a similar strategy to increase profits during times of increased demand.


3. eBay made the auction pricing system popular, where customers compete on price so that sellers are able to maximize their earnings for each product. Auctions work when supply is limited by gaming demand.


4. Time-based pricing is common with hotels and airlines. Similar to Uber’s surge pricing model, their prices go up and down during specific times of year, days of the week, or time of day based on the likelihood that people will be traveling.


5. Many physical retailers will use variable pricing based on location. They might offer a product for one price in New York City and a different price in suburban Pennsylvania.


6. Discounting is a form of variable pricing many companies use. Offering discounts at specific times or to specific categories of customers helps drive sales where they otherwise might be low or non-existent.


7. Pricing based on benefits allows companies to suit a product to each individual customer’s needs. Car dealers and many B2B sales use negotiation to match a variable set of “options” to the needs of the customer, where the pricing will depend on the final product.

As with any pricing strategy, your goal is to maximize profits. Use variable pricing if it allows you to find a more effective balance of sales and profit margin per sale.

Source: B2C