The purpose of price differentiation is to:

Price Differentiation Definition: A strategy where a company charges different prices for the same product in different markets or segments.

Purpose: The main goal is to maximize revenue by capturing consumer surplus.

Outcomes:

Reduce Sales Variability (A): Not a direct goal of price differentiation.

Clear Out Inventories (B): Generally achieved through discounts and sales, not price differentiation.

Increase Total Revenue (C): By setting prices according to consumers' willingness to pay, firms can increase overall revenue.

Increase Customer Loyalty (D): While it might be a side benefit, it is not the primary objective.

Conclusion: The primary purpose of price differentiation is to increase total revenue by capturing maximum value from different market segments.

References

"Pricing Strategy: Setting Price Levels, Managing Price Discounts and Establishing Price Structures" by Tim J. Smith.

APICS Dictionary, 16th Edition.