6.10:
Product Mix Pricing Strategies I
Product mix pricing strategies guide businesses in setting prices across their product lines to optimize profits. There are five key types.
First is Product Line Pricing. Here, the products within a line are priced differently according to their varying features or quality levels, allowing for diversity in market segments and revenue maximization.
Second is optional product pricing, where companies advertise a low price for the base products and upsell additional features, boosting total purchase value. It appeals to both cost-conscious and value-seeking customers.
Third is Captive Product Pricing. The primary product is priced competitively, and necessary add-ons from the same company are marked up. It ensures sustained profitability.
Fourth is By-product pricing, in which the primary product's cost is offset by the sales of the by-products produced during production. It reduces waste and enhances business efficiency.
Fifth is Product bundle pricing. Multiple products are sold together as a package, with a perceived value higher than the individual products' costs. It helps increase sales, clear unsold items, or introduce new products.
6.10 Product Mix Pricing Strategies I
Product mix pricing strategies guide businesses in optimizing profits across their product lines, each tailored to market needs and consumer segments. The strategies include:
- Product Line Pricing: Sets prices within a product line based on feature diversity and quality, aiming to capture various market segments.
- Optional Product Pricing: Offers a base product at a low price while upselling additional features, catering to both cost-conscious and value-seeking customers.
- Captive Product Pricing: Prices the main product competitively while marking up necessary add-ons, ensuring sustained profitability.
- By-product Pricing: Offsets the primary product's cost by selling by-products, reducing waste, and enhancing efficiency.
- Product Bundle Pricing: Sells multiple products as a package at a perceived value higher than individual costs, boosting sales and possibly clearing inventory or introducing new items.
These strategies diversify a company's offerings and market reach and provide competitive advantages through strategic pricing. They enable businesses to maximize profitability by tapping into consumer surplus and encouraging purchases of higher-margin items. For customers, these strategies offer a range of options tailored to their budgets and perceived value, sometimes saving money through bundled offers and enhancing the perceived value of certain products.