What is the primary purpose of price segmentation?

The primary purpose of price segmentation is to divide a market into groups based on their willingness to pay. This approach recognizes that different consumers have varying levels of price sensitivity and perceived value for products and services. By understanding these differences, businesses can optimize their pricing strategies to maximize revenue and make their offerings accessible to a broader range of consumers. For instance, a company might charge higher prices to customers who are less sensitive to price and lower prices to those who are more price-conscious, thereby capturing more value from different segments of the market.

Price segmentation allows companies to effectively target specific consumer groups, enhance their competitive positioning, and increase market share by aligning prices with what different segments are willing and able to spend.