Think about street sellers manner towards their potential customers. They ask several questions to understand your budget, knowledge about product and level of necessity.
They get in touch with maybe hundreds of customers everyday, and have enough chance to test their customers attititude in every sitiuation like what they want, how much they can spend, how much they know about product. As a result of their interpretation on their potential customers, they determine an unique price which probably differs from customer to customer.
This type of pricing is almost impossible for companies because of regulatory factors. By modifying street seller manner into a more sophisticated methodology , most appropriate pricing approach can be attained ,if below 3 dimensions are measured:
- Wallet of share: Amount of money that consumer can allocate for the specific product. As the wallet share increases, price also goes up in parallel
- Necessity: Product is essentiality directly affects its price
- Product knowledge: Consumers are exposed to manipulation in the case of lack of knowledge about purchased product. As they aren't able to compare product features and unable to conclude on cost - benefit matrice. Even pricebecomes main differentiator for them which is worst case..
By estimating above dimensions for customers, proper price intervals can be estimated for various segments.
