Strategies for finding cavaliers

There are customers which are price sensitive and there are some who will pay a bit more, just to do business with you!

So which group should you target?

In many cases it is possible to sell to both groups. Its just the matter of identifying which customer is willing to pay a bit more and who is more price sensitive. This way you can charge according to their willingness to pay.

There are 3 strategies for identify customers are cavalier about price: 1) Unique Target 2) Group Target 3) Self-Incrimination

1) The Unique Target Strategy:
Evaluate each customer as an individual and charge according to how much he or she is willing to pay.
This is the strategy of the used car salesman or the real estate agent. It usually takes skill and a lot of effort; hardly surprising, then, that it is most often seen for items that have a high value relative to the retailer’s time.

Examples:
- Supermarkets accumulate evidence of what you’re willing to pay by giving you “discount cards,” which are needed to take advantage of sale prices. In return for getting a lower price on certain items, you allow the stores to keep records of what
you buy, and then in turn offer you coupons for discounts on products.

- Internet retailers such as Amazon can identify each customer by putting a tracing device called a “cookie” on her computer. Amazon used to tailor their prices based on their records of individual customers.

Of course, the “unique target” approach is unpopular. In Amazon’s case, customers started to realize that if they deleted the cookies on their computers, they were offered different, often lower prices. And when they found out what the company was
doing, there was an outcry. Amazon has promised not to do it any more.


2) The Group Target Strategy:
Offer different prices to members of distinct groups.
Who could complain about reduced bus fares for children and the elderly? Surely it must be reasonable for coffee shops to offer a discount to
people who work nearby, and for tourist attractions to let locals in for a lower rate?

Examples:
- Disney World in Florida offers admission discounts of over 50 percent to locals, they’re not making a statement about the grinding poverty of the Sunshine tate. They simply know that for a reduced price, locals are more likely to come regularly. But tourists will probably come once, and once only, whether it is heap or expensive.

- The AMT coffee bar in Waterloo station in London will knock 10 percent off the cost of your coffee if you work locally. This isn’t because the local workers are poor; they include top government officials and the extravagantly remunerated employees of the gigantic oil company Shell. The discount reflects the fact that local workers are price-sensitive despite being rich. Commuters who pass through Waterloo in a hurry see only one or two coffee bars and are willing to pay high prices for convenience.


3) Self-Incrimination:
To get customers to give themselves away, sell products that are at least slightly different from each other. Offer products in different quantities or with different features or even in different locations.


Examples:
- Starbucks offers products in different quantities (a large cappuccino instead of a small one, or an offer of three for the price of two), or with different features (with whipped cream, or white chocolate), or even in different locations, because a cup of cappuchino in a station kiosk is not the same product as a physically identical coffee shop in an out-of-town superstore.

Source: The Undercover Economist