We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Marketing

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is Variable Pricing?

Malcolm Tatum
By
Updated: May 16, 2024
Views: 22,852
Share

Variable pricing is a marketing approach that permits different rates to be extended to different customers for the same goods or services. The approach is often employed in cultures where dickering over the price of goods is considered the norm, or potential buyers are allowed to participate in an bidding situation, such as in an auction. Even in countries where fixed pricing is the standard, variable pricing may come into play when the customer is committing to the purchase of large volumes of goods or services. When this is the case, the customer must usually comply with specific criteria in order to enjoy pricing that varies from the standard cost.

The variable pricing strategy is different from the fixed price policy that prevails in many situations. With fixed pricing, the seller evaluates all relevant factors, determines if a buyer should receive a rate that is different from the standard price, then extends that price for all purchases made over a specified period of time. Usually a contract is used to lock in those discounted rates for a period of time agreed upon by both the buyer and the seller. In contrast, variable pricing is normally extended on a one-time basis. Should the customer wish to place a second order at a later date, the circumstances are assessed anew, and alternate pricing is issued if the seller believes it is merited.

One of the classic examples of the use of variable pricing has to do with street vendors who sell various types of small goods. Often, there is a standard price posted for each item on sale. If the vendor really wants to sell an item, and determines that a prospective buyer is not willing to pay the posted price, he or she may engage the individual in a negotiation of the sale price. Sometimes referred to as dickering, the buyer and seller make offers back and forth until they can settle on a price that both believe is fair. Throughout the process, the buyer tries to drive the price down as much as possible, while the seller attempts to obtain the highest possible return from the sale.

The real estate market also functions with the use of variable pricing. Prospective homeowners will often submit bids for properties that are less than the posted asking prices, in the hopes that the owners will accept a smaller amount. This often leads to a series of offers and counteroffers that sometimes results in a sale taking place. At other times, the two parties are unable to come to terms, and no sale takes place.

Variable pricing does provide some benefits, but also has the potential for drawbacks. On the one hand, sellers can use this pricing strategy to move goods or services that have failed to perform as originally anticipated, allowing them to earn a modest profit or at least recoup their investment in the products. A possible down side to variable pricing is that it can lead to losing other customers who paid full price for their purchases, if they find out that a more recent customer was able to receive a lower price.

Share
SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By Glasis — On Jan 30, 2014

More often than not, if a vendor is willing to negotiate the price of a product, the quoted price is much more than they actually expect to, or need to, receive.

A good example of this is car sales. Few customers have ever paid the full sticker price for a vehicle.

The special family and employee and other discounts car dealers offer as favors to good customers are really nothing more than the price reductions they plan to give everyone to get them to buy a car from their lot.

By Telsyst — On Jan 29, 2014

I agree with the article. If I was a customer and I found out someone else was paying less for the same product I am buying, I would be angry, no matter what reason is given.

Unless, as the article says, you are talking about bargaining with a street vendor for a product that probably isn't worth the assigned price, the price should stay the same for all buyers.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.smartcapitalmind.com/what-is-variable-pricing.htm
Copy this link
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.