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How to prevent customers from reselling goods? This can be influenced by a number of factors:
High transaction costs of resale
That is, the person/company loses all the benefits due to transportation costs, import tariffs, etc. These factors provide the manufacturer with the opportunity to sell the product in different countries at their own prices.
Vertical integration and vertical restraints
If the manufacturer of the importance of lawyer database final product and the supplier of the intermediate product are part of a vertically integrated firm, then the finished product can be supplied at a lower price compared to the cost of sale to “external” buyers.
Product Features
The manufacturer can make the product unsuitable for resale without worsening its consumer properties (for example, medical alcohol cannot be used in the production of alcoholic beverages due to special additives).
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Uniqueness of the product
It is not subject to resale in principle. The possibility of price discrimination is related to the existence of arbitrage of this action. In any type of price discrimination, the manager must know everything about consumers. There are two types of arbitrage:
related to the possibility of supplying the goods;
associated with the possibility of transferring demand, i.e. the consumer chooses from various options offered to him:
“price – quantity” (buy two units of goods at a total cost of P(2) or one at a price of P(1));
"price - quality" (buy a plane ticket in business class instead of economy).
Price discrimination of a product allows a company to increase its sales and its own profits with minimal investment in modification. Thus, replacing a color with a fashionable one and a slight innovation in terms of design can affect interest in the product and increase its cost.
Buyers of a certain segment can be motivated by the opportunity to buy the product first: a closed sale or a presentation of a new collection to luxury customers. The rest will also be able to buy the product, but later and at more attractive prices. Everyone will benefit.
Case: VT-metall
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Degrees of price discrimination
There are 3 levels of price discrimination. They depend on the number of consumers attracted by the company.