One way to compete on price is to make it difficult for the consumer to know the true price of the product. Companies sometimes use differentiation to hide the true cost of purchasing products and services. Many companies accomplish this task by offering very complex pricing and bundling plans (numerous versions). Wireless service and long-distance providers have become very good at this strategy. These providers rarely offer simple plans such as 5 cents per minute for a certain level of usage or 3 cents per minute for a certain level of usage. Instead, they offer customer’s very complex pricing schemes and service bundles that are difficult to disentangle. This helps these providers as well as providers of cable and Internet services to reduce the damage of price competition. Consumers have to engage in a large amount of price and feature comparisons in order to understand the features provided in the tableau of products and services. This is essentially a form of product differentiation but it is more precisely service differentiation.
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How Wireless Companies Compete on Price: Hide the True Price
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