Intro to Marketing Mr. Bernstein Pricing Strategy: Yield Management November 24, 2014.

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Presentation transcript:

Intro to Marketing Mr. Bernstein Pricing Strategy: Yield Management November 24, 2014

Price Discrimination Charging different customers different prices Example: Airline tickets Not necessarily based on volume Based on differing buyer “elasticities”, or sensitivity to price changes 2 Intro to Marketing Mr. Bernstein

Example: The “Slam Grand” breakfast Assume only 2 market segments – students and senior citizens Diner’s MC = $2 100 sr. citizens will pay $4 100 students will pay $8 Students have lower price elasticity – Why? 3 Intro to Marketing Mr. Bernstein

Perfect Price Discrimination Each customer is charged exactly their maximum willingness to pay Profits are maximized when firms can identify buyer’s elasticity “Yield Management” is the practice of price discrimination 4 Intro to Marketing Mr. Bernstein

Yield Management: The practice of price discrimination 5 Intro to Marketing Mr. Bernstein

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