Price Discrimination at the altar of God

Note to new readers: Do check out my other articles on versioning and price discrimination. It would help me greatly if readers coming from Rutgers or New Jersey let me know how they found this article.

To my non Hindu readers the words “car puja” may not ring a bell (no pun). Almost every Hindu Temple in your neighborhood offers this service, “car puja” to the devotees  (customers?). What is it exactly? When someone buys a new car they bring it to the temple and a Hindu priest blesses it with ceremonies and chanting. It is a kind of insurance, buying peace of mind or an unselfish act (or call it by any other unsavory label).

The last time I walked past one such event at a East Bay Hindu Temple, I saw two cars parked side by side  waiting to be blessed. One was a BMW X series and the other a Toyota Corolla.  The price the temple charges for the ceremony? A standard fee of $25.

The value to customer is of emotional kind and not economical. We cannot add up cost savings,  incremental revenue or replacement costs and compute the Economic Value Add. The segmentation variables are also not clear, except for propensity to buy luxury vs. utilitarian cars. The perceived value to the customer is of private kind and is different for each customer. For instance, the value of the ceremony to someone who bought Lexus is much more than the value to someone who bought a Corolla. That said, the value of the blessing to a first time car buyer or someone who  bought the maximum they can afford (even if it were a Corolla) is high.

This screams out for practicing price discrimination.

For all these marketing aspects this serves as a case study for other scenarios in which similar conditions apply (from  buying data backup solutions to luxury products).

I understand places of worship are not about profit let alone practicing price discrimination (be it good or bad) but this is a case where the customers may prefer some price discrimination.  This is a perfect case for calling the practice “Price harmonization“. Besides, the additional revenue gained can be put to good use.

What are some of the ways the Temple could match price with value?

The price they charge $25 needs improvement. While it is not worthwhile to do quantitative research (Conjoint analysis) to set price, they should use  “Relative Pricing“. The customer just spent anywhere from $20K to $50K, they already have a high anchor. They also spent $600 for the insurance and most likely spent $50 for filling up in the past few hours.  So the lowest price charged should be at least the price of a tank of gas.

This will be an improvement, but it still leaves considerable consumer surplus.  Here are some ways to practice price discrimination:

  1. Pay What You Can: Since the perceived value is different we can expect the customers to pay different prices. But as I have written in the past the value and the right price to pay is not obvious to the customer and hence is not true price discrimination.
  2. Pay What You Can with Suggested Price List: Post a price list with caption “Patrons like you typically pay $50, $100 and $200”. This might work with most choosing middle option.
  3. Price Based on Car: Most software companies practice this, charging customers based on the type and configuration of servers they run the software on. While this seems logical it is complicated in practice. (This is Third Degree Price Discrimination).
  4. Versions: The recommended approach that fixes flaws in (1) and (2). Offer three versions of the service each priced based on three different price points of cars. When customers see the versions they will self-select themselves to the right version. (Second Degree Price Discrimination)

Versioning is also the recommended method for other marketing scenarios where the value to customer segments varies but is not easily measurable. Any versioning you implement for these businesses will be better than a single priced option but I recommend doing quantitative research to find the segments and what is relevant to each segment. (Stay tuned for upcoming article on how to design versions for Software products).

Which brings us back to the theme of most of my posts – “If one price is good, two are better” – even in the altars of God.

What is your pricing strategy?