Different buyers value the same thing differently. A single price therefore leaves money on the table twice: it is above what some buyers would have paid, so they do not buy, and below what others would have paid, so they get a bargain.

Charging them differently is price discrimination. The term sounds pejorative and describes something almost every business already does — student rates, volume discounts, early-bird pricing, enterprise tiers.

The three degrees, briefly

Economists distinguish three and the distinction is useful.

Individual pricing. A different price for every buyer, set at exactly what they will pay. It requires knowing each buyer's willingness to pay, which is why it survives mainly in negotiated sales — which is to say, in most professional services, where every quote is this whether the firm frames it that way or not.

Versioning. Different versions at different prices, letting buyers sort themselves. A basic tier and a premium tier are not primarily about features; they are a mechanism for finding out what each buyer will pay without asking. This is the workable form for most businesses.

Group pricing. A different price for an identifiable group — students, nonprofits, first-year customers. Easy to administer, easy to defend, and limited by how well group membership correlates with willingness to pay.

What makes it hold up

Three conditions, and the third is the one businesses forget.

You need some way to tell the groups apart — either by asking, by observation, or by letting them self-select through versions.

Resale has to be difficult. If the cheap buyer can resell to the expensive one, the prices converge. This is why services price-discriminate far more easily than goods.

The difference needs a reason the buyer would accept if they heard it. Volume, term, support level, speed, scope — any of these justify a different price to a buyer who discovers the other one. "We thought you could afford more" does not, and buyers do discover.

The third condition is what separates a pricing structure from a thing you have to hope stays quiet. Structures survive transparency; guesses do not.

Doing it without a pricing department

Version deliberately. Build two or three genuinely different offers rather than negotiating each deal from one price. The versions should differ in something the buyer cares about, and the gap between them should be large enough that choosing is a real decision.

Price the situation, not the client. Urgency, risk, scope and access to your people are legitimate reasons for a higher price and they are visible to the buyer. Company size is a proxy for willingness to pay and is not, on its own, a reason anybody accepts.

Let them sort themselves. A fast-turnaround option priced higher does not require you to identify who is in a hurry; the ones in a hurry identify themselves. This is the whole appeal of versioning and it removes the negotiation entirely.

The relationship to discounting

The same act, framed two ways, with different consequences. A higher price for a buyer who wants more and a discount for a buyer who pushes are arithmetically identical and behaviorally opposite: one rewards the buyer's requirements, the other rewards their willingness to negotiate.

A business that discounts is price discriminating on the dimension of how hard someone argues, which is the one dimension guaranteed to select for the worst clients and to feed the discount spiral. A business that versions is discriminating on what buyers want, which selects for fit.