Monday, 30 August 2010

Price Discrimination

It was the first time I experienced a "live" demonstration of price discrimination; a literal face-to-face encounter between the salesperson and I. Price discrimination exists when the sale of identical goods or services are transacted at different prices from the same provider. Price discrimination is practiced in many industries on a daily basis, ranging from airlines companies, mobile phone network companies to even restaurants. However, with the prominence of perfect information or perfect substitutes, the pure existence of price discrimination falters. It can on be a feature in monopolistic and oligopolistic (a few competitors) markets, where market power can be exercise.

This unethical practice took place when I was hunting around for the perfect yoga package at a particular yoga centre here in Hong Kong yesterday. Yes, the market was oligopolistic, where there are currently two major players in the yoga industry. Nonetheless, the centre I approached had a competitive edge; not only did they offer yoga classes but pilates, spinning and dance classes as well. I was, indeed, thoroughly impressed.

But, what majorly put me off was the salesperson and the fact that the yoga centre did not have a proper price chart for various packages. Towards the end, she was pushy, a complete boot licker, annoying (because Carl and I had to rush off for dinner and she did not let us leave by stalling us with more codswollop = sales pitches) and had the audacity to change the price and the duration of the Unlimited Package THREE times:

a) HKD1,288 for 12 months (I was not interested as it was too costly)
b) HKD899 for 18 months 12 months (Duration of 18 months was too long, she changed it to 12)
c) HKD699 for 18 months (Price was reasonable but duration was too long)

At that point in time, I was extremely disgruntled, frustrated and desperately wanting to leave. Her manager even had to "dramatically" interject to offer the last price. "Why dramatic?", you might ask. Well, it is because it was all an act and I felt like my precious pennies were being cheated by crooks like them! Plus, they wanted me to sign up with their package there and then! Who would have known that the price and duration of packages were negotiable? Probably most, if not, all of their customers have been blindly cheated. Is this practice even legal?

Hence, from what I can decipher, there are a few determining price factors which the salesperson will take into consideration:

1) Appearance
2) Background
3) Contact with competitors i.e. what I love/hate about their competitors

This is one yoga centre, which I have lost all faith and trust in even though they offer awesome facilities and an amazing array classes. Perhaps they might call me in a few days to built rapport and to reinstill that sense of trust? Perhaps they might call me to offer an even more attractive package? Who knows? There is a lot of calculated malice and shoddy workmanship in the history of marketing. I am most definitely keeping my options open.

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