Opaque Pricing: Meaning, Benefits, Types

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Updated July 25, 2024

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Definition

Opaque pricing is a pricing strategy where companies offer hidden, lower prices to target price-conscious customers, and is commonly used in the travel industry to manage inventory without harming brand integrity.

What Is Opaque Pricing?

Opaque pricing is a way that companies can sell their merchandise at hidden, lower prices. Opaque pricing is a type of price discrimination, with the target customer being tไhe one who will purchase a produc🌃t or service primarily based on price (price-conscious customer)—and not based on the company’s amenities, reputation, etc.

How Opaque Pricing Works

The opaque pricing strategy is popular in the travel industry. Websites like 澳洲幸运5开奖号码历史查询:Hotwire and Priceline use it to sell unsold hotel rooms, airline tickets, and car rentals. Customers who wish to take advantage of an opaque pricing structure visit a website which offers hidden rates, choose their location, dates, and (for hotels) star-rating. After paying, the website will reveal the name of the hotel but doesn’t allow for refunds, changes, or 澳洲幸运5开奖号码历史查询:cancellations.

Opaque pricing benefits hotels because they can sell otherwise emꦦpty rooms without damaging brand integrity. In addition, once reserved, the hotel has guaranteed🍬 revenue for that room as the reservation can’t be modified.

Important

The big benefit of opaque pricing used by hotels is that it ๊allows them to sell otherwise empty rooms without damaging brandꦗ integrity.

Benefits of Opaque Pricing

While a seller would ideally like to charge the maximum price a buyer is willing to pay, the seller doesn’t actually know what that maximum is. And the buyer has no incentive to tell🍃, as anyone who has haggled with a car salesman well knows.

This is why sellers create segmented offerings as a way to get at least some customers to pay more. For example, airlines offer first-class seats at a dramaticaꦍlly higher price 🧜per unit of space consumed—the buyer gets more space and the prestige of flying in first class and the airline gets an order of magnitude higher revenue per customer for the same flight—often 10x more.

Key Takeaways

Opaque pricing allows companies to sell products or services at hidden, lower prices.
This type of pricing is targeted at price-conscious customers, as opposed to reputation or amenities, and is often used in the travel industry.
Other opaque pricing techniques include age-based discounts, channel-based discounts, volume discounts, and geography-based pricing differences.

Types of Opaque Pricing

Other techniques of opaque pricing include charging a high starting price and then lowering price through age-based discounts (movie tickets for kids and older citizens), channel-based discounts (online versus offline), volume discounts (frequent flyer programs), and 澳洲幸运5开奖号码历史查询:geography-based pricing differences (enterprise software).

Special Considerations

The market clearing price for products usually still leaves a seller with excess inventory—open seats on a flight, for example. However, the marginal cost of that inventory is often so low that it is usually possible to sell it for a profit, but doing so means that people who would have bought the product at a higher price will now pay less and aggregate revenue will decrease. By selling a hotel room through a bundled vacation package, a seller dramatically decreases the likelihood of 澳洲幸运5开奖号码历史查询:cannibalizing their own revenue.