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Price differentiation model: its challenges and solutions

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  • Amoy X. Yang

    (Analytics Consulting)

Abstract

Conventional price models resolved one optimal price that aims at maximizing an overall profit in universe. If the point-optimization can be further refined into multiple price-tiers, it is the price differentiation model that caters to different price perceptions in terms of customers’ engagements, preferences, affordability, and so forth. Modeling for differentiation virtually strives for an additional lift over the benchmark that is pre-established on ‘test’ versus ‘control’. Pricing model in conjunction with such an algorithm exhibits how to leverage marketing strategy by making right offers to right audiences. However, no pricing model is simple—not to mention differential complexity, from which true difference(s) to be discovered in many cases could be tricky, subtle or ambiguous. Analysts in price industry have long encountered difficulties when navigating a strong yet robust model, particularly in lack of literatures detailed with its procedures. This is where we come from to probe into its challenge and relevant solutions.

Suggested Citation

  • Amoy X. Yang, 2019. "Price differentiation model: its challenges and solutions," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(2), pages 123-132, April.
    • Handle: RePEc:pal:jorapm:v:18:y:2019:i:2:d:10.1057_s41272-019-00187-5
    DOI: 10.1057/s41272-019-00187-5
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    References listed on IDEAS

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