Price differentiation strategies [Elektronische Ressource] / by Agnieszka Wolk

Price Differentiation Strategies Dissertation Submitted to the Faculty of Business and Economics University of Frankfurt by Agnieszka Wolk Frankfurt am Main 2007 IIForeword Especially the Internet provides a high number of services that have very high fix costs and very moderate variable costs. This applies, for example, to offers of publishing companies, e.g., the search and retrieval of scientific publications, digital music productions, platforms for the production of weblogs and for online communities like Facebook or Xing. Frequently, companies can only offer such services profitably if they use differentiated prices. Thus every customer who pays a price above the variable costs causes a positive gross margin. Yet, the high fix costs can be covered only if at least some of the customers pay prices which lie substantially above the variable costs. Besides, the application of differentiated prices is favoured by the fact that the digitalized services can be easily changed in some attributes so that those services can be better targeted towards different segments of the market. This allows for price differentiation, a strategy where companies profitably sell fairly similar products to different consumers at different prices.