Price Discrimination And Consumer Behaviour

The main focus of this research study was to study the phenomenon of price discrimination in the business universities. For this purpose Dainora Grundey & Ingrida Griesiene selected two business universities of Lithuania (Europe). A comparative analysis of both universities discloses that pricing strategies differ from university to university. They targeted the tertiary education (post-secondary education), as governors and administrators seek profitability as well, taking into account various important factors, such as

• Economic crisis;
• Demographical crisis i-e shrinking educational market in most developed countries, including Europe;
• Shortage of economic resources (labor, land and capital)
• Deficiency of population’s interest in higher education;
• Increasing fees for tertiary education;
• Lack of government’s funding to insure free tertiary education (for at least a proportion of population);

The research objective of this study is price discrimination, which necessitated the solution of the following research tasks

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• To define price discrimination in general terms (as applied in marketing, economics and management sciences)
• To determine and identify the levels of price discrimination of two business universities in Lithuania at the theoretical level.

Main Findings

Four different perspectives of price discrimination are referred as micro-economic, marketing, economic, and money & business. The overview of price discrimination cases in the tertiary education (higher education) sector pointed out that ‘third-degree price discrimination’ is the most common case in practice. The factors of price discrimination in higher education could be summarised as follows:

• Situation # 1: The price discrimination in higher education lies in charging different fees for different customer segments (fee concessions); or charging no fees.
• Situation # 2: The pricing policies of colleges and universities normally based on costing model, which incorporates this year’s salaries, fixed costs, and variable costs need to be offset by revenues generated by tuition fee, property tax, apportionment and other general funds.
• Situation # 3: The overview of price discrimination cases in the tertiary education (higher education) sector pointed out that third-degree price discrimination is the most common case in practice, such as university national and international rankings, institutional prestige, need-based admissions, need-based financial aid policies; quality of studies, merits and awards for students. (Dainora Grundey, 2011)

Explores the interaction between inequality status and discriminating bases. Outcomes reveal that discriminating bases affect all three responses for disadvantaged consumers, but only influence perceived unfairness for advantaged consumers. Direct discrimination conforms to social norms for disadvantage consumers and induces the weakest unfavorable responses. While direct discrimination against social norms generates the highest perception of negative emotions and unfairness but has similar effects on store choice to indirect discrimination.

Investigates the impact of data revelation of information disclosure order by examining pre and post-purchase disclosure. Outcomes reveal that post-purchase revelation of discrimination data induces higher negative emotions for indirect discrimination, but is quite insignificant for direct discrimination or indirect discrimination.

The most significant factor possibly affecting consumer responses is the timing to disclose the price discrimination information. Some supermarkets mark membership costs right the retail shelves, whereas others charge discounted prices only when consumers show their member cards to the cashiers. Similarly, airline companies adopt sophisticated dynamic pricing schemes that change ticket prices hourly. In this case, consumers only know whether or not they overpaid for their tickets if they chat with other passengers after the fact. Thus, information disclosure timing crucially affects consumer acceptance of the pricing policies and constitutes an important strategic decision for sellers

The central argument of this study is that a consumer confronted with price discrimination evaluates both prices: the one offered to the consumer and the one offered to others. A consumer cares not only about distributive justice in terms of equality rule, need rule, and transaction utility, but also about procedural justice regarding whether having the freedom to choose to be advantaged or disadvantaged. (Chi-Cheng Wu, 2012)

Conclusion

The above research studies show that buyers are discriminated and that this discrimination is correlated directly with the behavior of the buyers and indirectly with their personal characteristics. As the market gets far from the absolutely competitive market conditions, the distinction between the market value and also the incremental cost will increase. Then, this causes the market effectiveness to decrease. In a different way to extend the market effectiveness during which markets it's not possible to extend the competition by increasing the amount of corporations is to implement the value discrimination. Value discrimination will increase the output, decrease total weight lessen close monopoly. Value discrimination may decrease value at low financial gain market and bars this market to pack up. As a result value discrimination will increase market potency.

Recommendations

• Based on the above discussion, dealers and retailers are recommended to carefully discriminate prices keeping in view the consumers buying behavior patterns, which is one of the most successful ways to know consumers’ interests when making a purchase decision.
• The effective use of marketing strategy and the marketing mix will ultimately leads to profitable customer relationships and to set suitable prices to their items as pricing has a direct impact on a company's revenue.
• Moreover, a sophisticated software of Customer Relationship Management (CRM) can be used to maximize customers loyalty, which will ultimately leads to a company success.

References

1. Alan Kirman, S. M. (2008, December Sunday). Price Discrimination and Customer Behaviour:. 43. Marseille, France.
2. Chi-Cheng Wu, Y.-F. L.-J.-J. (2012). Consumer responses to price discrimination: Discriminating bases, inequality status,. Journal of Business Research, 106-116.
3. Dainora Grundey, I. G. (2011, June). PRICE DISCRIMINATION:A COMPARATIVE STUDY OF BUSINESS UNIVERSITIES IN LITHUANIA. Economics & Sociology, 64-77.