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1 minute read
Spotify now offers its services in more than 61 countries on 5 continents, and of course, these countries all face different prices. After all, there is a significant difference between what a user from Argentina is willing to pay to stream the new Ed Sheeran album compared to an American or European user. And so, a US subscription costs $10 and the Argentinean version costs $4.50.
However, a couple of days ago, Spotify launched a worldwide discount offering for students (an enormous customer segment for Spotify), offering 50% discount for all students. Worldwide. So an American student will be paying $5 while an Argentinean student pays $2.25.
Assuming that Spotify's initial pricing was set according to the general willingness-to-pay level of their customer base in the different countries, the new discounting will not be able to maintain this accuracy. Essentially, Spotify is using the willingness-to-pay of the general user base as a benchmark for students' willingness-to-pay. However, using this benchmark assumes that the difference in willingness-to-pay between students and the general userbase is the same across countries. This is unlikely, as student segments have very different characteristics: e.g. the UK and US has many international students, and have a larger population of postgraduate students (such as MBAs, who don't really need a 50% discount).
The lesson here is that if you want to optimize pricing for different segments, this needs to be done for each market. You cannot simply assume that if students' willingness-to-pay in the US is 50% lower than that of the general user base, the same will be true in Chile.
