Price discrimination (3 Types)
Taking into account the above information the following market strategy of price discrimination has been devised. Price discrimination exists when a firm with market power charges different prices to different consumers for identical products (Ruby, 2003).
The conditions of price discrimination:
1) It must have market power
2) It must segregate the market between consumers with different price elasticity of demand and willingness to pay
3) It must have no resale purchase
The E-Book is designed in congregation to students studying Economics at Westminster University …show more content…
Versioning will offer several variations of the product differentiating in the quality and respectively the price charged (Schmitz, 2012). The proposed strategy will offer is three versions.
To implement a rule of three was determined by the Goldilocks pricing rule (Shapiro and Varian, 1998). A summary of this rule is consumers will delay purchases when there are many choices due to the excess demand of cognitive processing.
Version 1) Hermes (FREE)
• Price sensitive product
• Students must create individual logins which can only be used on one device at a time
• FREE subscription
• Frugally engineered with basic features
• All content is provided with suggestions for further reading
• Aimed at students studying economics, or related subjects who simply want an introductory to economics
• Automatically advertise, alert and recommend to …show more content…
The value that is being anticipated for the E-Book will presumably reflect a valid high level of switching costs, implying a strong correlation between network effects and switching costs symbolizing how hard it will be for students to consider substituting. For example, as previously mentioned providing a social platform that allows non-academic interactions, it is predicted to generate more value subsequently increasing the demand for the workbook, and respectively the value for switching costs. Therefore, if the strategy manages to create a strong positive dependency between network effects and switching costs, Westminster will be able to “lock-in” students.
Lock-In Strategy
The lock-in strategy - in which a company "locks in" customers by creating a high barrier to switching to a competitor (Robert and Kaplan, 2003). According to the strategy, alongside having a competitive advantage of lower prices but also operational efficiency through frequent software updates. Having a social platform will drive traffic, which will be constantly kept active through association with their peers and lecturers. Therefore through this lock-in strategy the demand should significantly increase in the long run as illustrated in Figure 5 Step 3 allowing the University to generate a small gross