A company’s decision to charge different prices for the same service sold in different market segments is most likely based on which of the following metrics?

A company’s decision to charge different prices for the same service sold in different market segments is most likely based on which of the following metrics?

A. Internal rate of return (IRR)

B. Lifetime customer value (LCV)

C. Net present value (NPV)

D. Return on investment (ROI)

View Answer

Answer: B

Explanation:

Context: Charging different prices for the same service in different market segments involves understanding the value derived from different customer groups.

Options Breakdown:

A. Internal rate of return (IRR): This is a financial metric for investment profitability, not directly related to pricing strategies.

B. Lifetime customer value (LCV): This metric evaluates the total revenue a business can expect from a customer over the duration of their relationship, making it crucial for segment-based pricing strategies.

C. Net present value (NPV): This measures the profitability of an investment, not specifically used for pricing decisions.

D. Return on investment (ROI): This measures the gain from an investment relative to its cost, not directly related to customer-based pricing strategies.

Correct Answer Justification: LCV provides insight into how much value different customer segments

bring to the company over time, allowing businesses to tailor pricing strategies to maximize

profitability from each segment.

Reference: Marketing and pricing strategy literature

Studies on customer value and segmentation