Substitution Pricing

Substitution Pricing

Substitution Pricing Jonathan Poland

A substitution price is the price at which a customer will choose to switch to a different product or service instead of continuing to purchase the original product or service. This can happen when the customer perceives that the alternative product or service is a better value at a certain price point. For example, a customer may choose to switch from cable television to streaming media services if they believe that the latter is a better value at a lower price. This phenomenon is often observed in industries where there are many similar products or services available, and customers can easily switch from one to another based on price.

Here are some examples of substitution price:

  1. A customer may choose to switch from a premium cable television package to a streaming media service if the latter is offered at a lower price.
  2. A consumer may choose to switch from a brand name laundry detergent to a generic brand if the latter is offered at a lower price.
  3. A traveler may choose to switch from a full-service airline to a budget airline if the latter is offered at a lower price for a similar route.
  4. A restaurant patron may choose to switch from a sit-down restaurant to a fast food chain if the latter is offered at a lower price for a comparable meal.
  5. A consumer may choose to switch from a traditional brick-and-mortar retailer to an online retailer if the latter is offered at a lower price for a similar product.

Substitution price is a common phenomenon that can be observed in many different industries. Some examples of industries where substitution price may be relevant include:

  1. The telecommunications industry, where consumers may switch from one service provider to another based on price.
  2. The retail industry, where consumers may switch from one retailer to another based on price.
  3. The transportation industry, where travelers may switch from one mode of transportation to another based on price.
  4. The food and beverage industry, where consumers may switch from one restaurant or food brand to another based on price.
  5. The entertainment industry, where consumers may switch from one type of entertainment to another based on price.

Overall, substitution price can be relevant in any industry where there are multiple similar products or services available, and customers can easily switch from one to another based on price.

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