Skip to main content
PRODUCT-STRATEGY14 MIN READ

Second-Degree Price Discrimination: Product Versioning and Bundling

Design product versions and bundles that segment customers by willingness to pay without explicit price differentiation.

Second-degree discrimination achieves market segmentation through product design rather than overt price differences. Customers self-select into tiers based on their needs and willingness to pay. Common mechanisms include tiered service levels (cloud storage: 5GB free, 50GB for $2/month, 1TB for $10/month), feature limitations (software with and without advanced tools), or bundling (basic, professional, enterprise packages). The strategy requires careful design: lower tiers must be unattractive enough that high-value customers upgrade, but attractive enough to convert price-sensitive customers. Quality or feature degradation must align with actual willingness to pay differences. This is legally safer than explicit discrimination and avoids customer resentment…

Read the full lesson

Sign up free — one personalized lesson every day, matched to your role and goals.

Already have an account? Sign in

← Back to library