Consumer pricing or consumer-based pricing is an approach to pricing which accommodates consumers’ perceptions of products and the prices they are willing to pay. Perception refers to the value given by consumers to a product. When consumers see that the product has a high value, then they are willing to pay more.
Companies must measure how much each consumer is willing to pay. Then, they charge prices according to their willingness. So, each customer will pay for a different price. Some individuals could pay higher than others.
In economics, this pricing approach refers to first-degree price discrimination or perfect price discrimination. Companies charge different prices to different customers, depending on how much they are willing to pay.
The consumer pricing technique will certainly provide the highest profit margins. However, in fact, it often only applies in theory.
It’s hard to discriminate prices in the real world perfectly. In addition to being difficult to measure customers’ willingness to pay, other problems arise. Individuals who buy cheaper will most likely sell it to buyers who are willing to obtain higher prices. Say, you purchase a product for Rp1,000. You know your friend wants it and is ready to pay high, say Rp2,000. Instead of buying from the same seller, of course, you will offer a product to your friend, say for Rp1,500. That way, you still get Rp500.