{"id":762,"date":"2013-05-05T17:23:03","date_gmt":"2013-05-06T00:23:03","guid":{"rendered":"http:\/\/www.artsjournal.com\/worth\/?p=762"},"modified":"2013-05-05T17:23:03","modified_gmt":"2013-05-06T00:23:03","slug":"how-student-discounts-work","status":"publish","type":"post","link":"https:\/\/www.artsjournal.com\/worth\/2013\/05\/how-student-discounts-work\/","title":{"rendered":"How student discounts work"},"content":{"rendered":"

\"show<\/a>Student discounts are offered many places – in restaurants, theaters, tuxedo rentals – and in both the commercial and nonprofit sectors. Nonprofits might want to discount student prices on equity grounds, giving them a break because they have less disposable income. But commercial firms offer these discounts too. It might be to try to gain loyalty to the brand that will extend beyond the customer’s student years. But it also could be simple price discrimination, recognizing that students have different demand patterns than graduates.<\/p>\n

How to set the discount? I’ll keep using students as my example, but this strategy can be applied to any identifiable group: seniors, veterans, those on social assistance, those who live within a particular geographic region, etc. All that matters is that you can identify whether or not the customer belongs to the group.<\/p>\n

To begin, imagine students and non-students as separate markets, in the same way that publishers and pharmaceutical companies treat different nations as separate markets. Then for each market, set the price that maximizes net revenues in that specific market. In other words, pick a student price that maximizes net revenues from students, and pick a non-student price that maximizes net revenues from non-students. This requires gathering intelligence on how these different segments of the population behave. How does student demand respond to a lowering of prices? How about the demand by non-students? You need to gather information on each of these types of sales over time to get a sense of the different demand patterns. Only then can you set about finding the prices for each segment that generate the most net revenue.<\/p>\n

What are the limitations on the strategy?<\/p>\n

First, there has to be a means whereby students cannot resell their purchases to non-students, making a profit for themselves. Perhaps student admissions are clearly marked as such, or the good cannot be bought in advance (like a ticket) but must be consumed directly on the premises (as in restaurants). Firms who price discriminate across countries in which they sell can only make it work if no one has incentive to purchase the good in the low-price country and ship it to the high-price country for resale at a profit.<\/p>\n

Second, keep in mind that the higher the price differential between the two market segments, the higher the incentive for customers to cheat. Nobody is going to look for a fake student identification card in order to get a 10% discount at the local lunch buffet, but if it is a 50% discount and more is at stake, they might.<\/p>\n

Third, as the price differential increases, those paying the higher price might come to feel that their own price is unfair, and be turned off buying at all. This risk is increased if the group receiving the discount is not particularly impoverished, but simply has different willingness-to-pay for the product. Discounts for seniors are not likely to be as problematic in this respect, since it is a discount most people hope to one day enjoy themselves.<\/p>\n

Each of these limitations works in the same direction: don’t make the discount too large, even if demand patterns are quite different across the two groups, as it will increase incentives for attempts at resale, and for people falsely identifying themselves as being in the group receiving the discount, and lead to bitterness by those paying a higher price. The less these factors are likely to be an issue, the more the pure strategy of focusing on demand by the two market segments can be used.<\/p>\n","protected":false},"excerpt":{"rendered":"

Student discounts are offered many places – in restaurants, theaters, tuxedo rentals – and in both the commercial and nonprofit sectors. Nonprofits might want to discount student prices on equity grounds, giving them a break because they have less disposable income. But commercial firms offer these discounts too. It might be to try to gain […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[26],"tags":[],"class_list":{"0":"post-762","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-issues","7":"entry","8":"has-post-thumbnail"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p3dIW5-ci","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":504,"url":"https:\/\/www.artsjournal.com\/worth\/2013\/03\/a-primer-on-price-discrimination\/","url_meta":{"origin":762,"position":0},"title":"A primer on price discrimination","author":"Michael Rushton","date":"March 20, 2013","format":false,"excerpt":"My previous two posts dealt with different aspects of price discrimination, and since many future posts will cover the topic from various angles, I think it worthwhile to go over a few basic ideas and definitions. Marginal cost will be defined here as the cost to your arts organization of\u2026","rel":"","context":"In \"direct price discrimination\"","block_context":{"text":"direct price discrimination","link":"https:\/\/www.artsjournal.com\/worth\/tag\/direct-price-discrimination\/"},"img":{"alt_text":"who knows their reservation prices?","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2013\/03\/audience-300x300.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":804,"url":"https:\/\/www.artsjournal.com\/worth\/2013\/05\/why-do-seniors-get-discounts\/","url_meta":{"origin":762,"position":1},"title":"Why do seniors get discounts?","author":"Michael Rushton","date":"May 23, 2013","format":false,"excerpt":"From the Priceonomics blog: You\u2019ve seen them on the bus, in museums, and at movie theaters: senior discounts. As a reward for being old, senior citizens pay a quarter less for bus fare, a small fortune less for movie tickets, and receive discounts generally all over the place. If you\u2019re\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"they don't look poor","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2013\/05\/cocoon-300x232.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1425,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/07\/strategic-pricing-for-the-arts\/","url_meta":{"origin":762,"position":2},"title":"Strategic pricing for the arts","author":"Michael Rushton","date":"July 21, 2014","format":false,"excerpt":"I'm pleased to say my book on pricing in the arts has been released - Amazon link here, and Routledge link (including for ordering e-inspection copies) here. What's it all about? As I do \u00a0on this blog, I have tried to give arts managers, and students of arts management, a\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"for what it's worth","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/07\/my-book.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1976,"url":"https:\/\/www.artsjournal.com\/worth\/2016\/02\/dynamic-pricing-and-price-discrimination-are-not-the-same-thing\/","url_meta":{"origin":762,"position":3},"title":"Dynamic pricing and price discrimination are not the same thing","author":"Michael Rushton","date":"February 6, 2016","format":false,"excerpt":"But a recent article in The Economist (!) confuses the matter. Dynamic pricing occurs when sellers adjust prices on a frequent basis to account for varying shifts in demand, or limitations in supply. Uber raises fares when demand spikes upward and drivers are scarce; sports teams cut prices for tickets\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"let's get this straight","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2016\/02\/apples-and-oranges.jpeg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":482,"url":"https:\/\/www.artsjournal.com\/worth\/2013\/03\/discounts-for-the-price-conscious-well-informed-consumer\/","url_meta":{"origin":762,"position":4},"title":"Discounts for the price-conscious well-informed consumer","author":"Michael Rushton","date":"March 18, 2013","format":false,"excerpt":"A little more than a year ago, J.C. Penney's new management announced a change to its pricing strategy, in an effort to turnaround the troubled store - get rid of \"nonstop promotions\" and move to a simpler pricing structure. In the current issue of the New Yorker, James Surowiecki tells\u2026","rel":"","context":"With 3 comments","block_context":{"text":"With 3 comments","link":"https:\/\/www.artsjournal.com\/worth\/2013\/03\/discounts-for-the-price-conscious-well-informed-consumer\/#comments"},"img":{"alt_text":"clip and save","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2013\/03\/coupons.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":2173,"url":"https:\/\/www.artsjournal.com\/worth\/2017\/02\/ideas-and-free-speech-on-campus\/","url_meta":{"origin":762,"position":5},"title":"Ideas, and free speech, on campus","author":"Michael Rushton","date":"February 11, 2017","format":false,"excerpt":"I was once a censor. Years ago, I was Dean of the school of fine arts on a Canadian university campus. The school had a degree program in film production, a somewhat free-wheeling operation. One day a parent of a twelve-year old phoned me, to say she had found in\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"order","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/02\/David-Cameron-speaks-duri-012-848x445.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/02\/David-Cameron-speaks-duri-012-848x445.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/02\/David-Cameron-speaks-duri-012-848x445.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2017\/02\/David-Cameron-speaks-duri-012-848x445.jpg?resize=700%2C400&ssl=1 2x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/762","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/comments?post=762"}],"version-history":[{"count":0,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/762\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/media?parent=762"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/categories?post=762"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/tags?post=762"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}