The Case for Variable Pricing of IDM

The Case for Variable Pricing of IDM

Ankit Bansal (Nanyang Technological University, Singapore), Desai Mayura Manohar (Nanyang Technological University, Singapore) and S. Shantani (Nanyang Technological University, Singapore)
DOI: 10.4018/978-1-61350-147-4.ch003

Abstract

This chapter proposes different variable pricing strategies that can be implemented in IDM marketplaces to increase revenues and consumption of IDM content. Adverse reaction of consumers to price discrimination, where they consider it unfair, is the greatest hindrance to successful application of variable pricing schemes.
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Background (Pricing Of Idm Content)

Flat Pricing

Flat rate or fixed pricing schemes refer to charging all the consumers the same price for the media goods. Sometimes, even different items are charged at the same price. An example of such flat rate pricing is the price of 99 cents per music single offered by iTunes music store till 2008. It later moved to a simple variable pricing structure with three price points.

The major drawback of flat pricing schemes is the lack of price segmentation, i.e. not charging different prices to different user segments. Flat pricing drives away some potential consumers whose prices are higher than they are willing to pay and leaves money on the table in case of high value customers for whom the price is lower than what they are willing to pay.

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