I started this recent series by noodling on product pricing models, but veered off on a tangent to discuss customer segmentation. Last time I suggested that transitioning customers from one class into a more desired class could be done by influencing behavior, and one way to influence behavior is through adjusting the prices of the products you are selling.

One simple example is discounting the cost of an item in return for a longer customer commitment. You may not realize how often this happens, such as the introductory offers on cable TV/internet packages, “free” mobile smartphones for agreeing to a two-year contract, or special package offers for VIP customers. There are other examples of variable pricing that are used to influence behavior: volume discounts, product rebates, credit card cash refunds and loyalty points (such as airline mileage programs) in which a product price may be artificially be made higher when coupled with a promise for some kind of value refund.

All of these examples are generic – the special offers or pricing modifications are offered in a blanket way without discriminating among the customers to whom the offers are made. My question, though, is at what point does variable pricing become standard in relation to the customer profile/segment/class?

Actually, it already exists for some e-commerce environments, in which a price quoted for one set of customers differs from the price quoted for a different set of customers. One might question the wisdom of the approach taken in that example, in which Mac owners were offered higher prices than Windows machine owners. But in terms of optimizing the customer relationship to extend customer lifetime and effectively establish the business terms that provide the most value to both the company and the customer, perhaps melding a customer classification and segmentation scheme with variable pricing may turn out to be a really good idea.