Smart pricing or scam?

The Medical City hospital charges more for the same medicine if you are in a private room than if you are in a ward section. Similary, doctors charge higher professional fees in a private room. A friend, working as a nurse at another hospital, confirms this practice at their hospital.

A play area for kids inside a mall charges 120/hour on weekdays, but 140/hour on weekends. There is nothing unusual on weekends — no clowns, no free drinks, no sexy attendants.

Is this a smart pricing scheme or are these businesses taking advantage of the situation? Patients admitted in private rooms are, in general, richer than those in the ward section. For most kids, weekends are the only time for mall.

Customers are willing to pay more for products (or services) that they know has more benefits and features than cheaper alternatives. A private room costs more than a ward because it offers privacy, more space, and guaranteed quiet time. But an antibiotic pill has the same effect whether it is taken in a quiet private room or in a noisy ward section yet why is it priced differently?

If the play area offers nothing better on weekends, does it have the right to raise prices?

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4 thoughts on “Smart pricing or scam?

  1. Hi Greg,

    This was a really interesting post!

    It seems like a pretty gray area. For instance, people will gladly pay more for a glass of wine at a restaurant, when they could buy it much more cheaply at a store. It’s expected.

    I think the sleaziness comes in to play when people don’t know they’re being charged more. ie. at a hospital, where they don’t show you the price until everything’s over. So the issue isn’t really pricing, but a violation of trust.

  2. Thanks Starr.

    (A)
    Professionals: $100
    Students: $80

    (B)
    Professionals: $100
    Students: 20% discount

    I wonder if there would be a difference in the way people perceive the price?

  3. There is definitely a perceived difference in a dollar amount reduction versus the % discount. Even thou it is the same amount of money, research shows that people (especially those less educated) lean towards a structure that states a % discount versus that which implies by a lower price.

    In response to the OT, I think if there is no added benefit, no difference from the normal; then it seems like a perceived value marketing scheme or dare I say, taking advantage of one’s ignorance.

    You can rationalize that people will pay more, therefore it is okay; but the bottom line is the value added benefit does not change for the consumer. Which the example of the antibiotic pill at the ward versus the private room clearly demonstrates.

    Starr, your comparison about the wine is not a valid comparison. A better comparison would be if I sit in one section of the Restaurant (we’ll call this the rich section) and you sit in a different section of the same Restaurant (say, the po’ section). We order the same wine, but mine costs more because I sat in the rich section. There is no difference in the taste of my wine versus the taste of your wine. We are enjoying the same establishment and the same wine. Perception can only take you so far before you come to realize that someone is taking advantage of you.

    I think the real gray line would be charging more based on characteristic traits. For example, in the web development world some developers will charge specific customers more than others (for the same work) simply because that person is very difficult to work with. They call it their “hassle fee”. Now there is something to ponder about.

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