In my last article about the German supermarket sausage pricing I asked you to conduct a thought experiment — If you were to charge different prices for men’s and women’s toilets how would you implement it such that it won’t cause customer backlash (labeled as bad price discrimination or worse gender discrimination) and helps you maximize profits (effective pricing)?
Is it simply loo-dicrous?
Let us do the thought experiment (keep that in mind for the rest of the article and do not see this as my position on this).
First the definitions.
Price Discrimination is using multiple levers to charge different prices for different customers to ensure those who can pay higher prices will do and hence maximize your profit.
Good Price Discrimination is where customers have choice and control and are not forced to act on marketer’s will. Good Price Discrimination is something that is not seen. No one notices that marketer is trying to maximize their profit and willingly pay higher prices. Like you choosing 13″ MacBook Air with 256GB.
Effective Price Discrimination is where those who can pay higher prices do so and are not tempted by your lower priced options and the profit is more than what you would have had without price discrimination.
Net result is capturing additional profit from your customers that they willingly give up.
What about pricing men’s and women’s toilets differently?
First hurdle to cross here is the reference price. If customers have never paid for toilets before and expect it to be part of whatever service you offer, their reference price is zero. Luckily reference price is malleable. One way to do that is using options as I show in this work below,
The next obvious hurdle is the question of customer choice and control. You cannot charge different prices for the two different toilets if they are separated in usage by respective genders.
That means designing products that are separated by the values they offer and not based on customer gender. A higher priced premium toilet and lower priced basic one. As long as you provide basic features like privacy and safety (may be make it single person stall with protection), that makes it as good Price Discrimination.
Now to make it effective you need to ensure
- the premium version is designed based on what customers value and are willing to pay for
- the basic version is not full featured that it adds too much value making premium version unattractive (see value step function)
If you intentionally want to nudge women to pick the higher priced version (for whatever reason, remember this is a thought exercise) you need to add features that would
- turn-off women from choosing cheaper basic version
- turn-off men from choosing premium version (nothing wrong if men want to pay premium price but you can get better separation in customer mix and hence better value perception if you can achieve this)
Step 1 is like removing roofs from third class train cars. May be you could brand the basic version with such revolting name that men will pick it but women won’t. May be you can remove a feature that is not essential but women will find important.
Step 2 is hard. I will once again recommend branding lever here, choosing a brand that will turn-off men (most at least) and offer lot more features that appeal to women. You should also highlight these features (and only these features) so the customer making the choice either sees full-value or no value from this option for the price they pay.
For good measure, to address the reference price issue, you should also add a really bad free version as well.
There you have it. Good and Effective Price Discrimination for toilets.
Whether or not that is the business you should be in and make the necessary investments to go through with branding, product design, messaging etc., is up to your economics.