9.4 Product Mix Pricing Strategies Flashcards
What are the five product mix pricing situations?
Product line pricing,
Optional-product pricing
Captive-product pricing
By-product pricing, and
Product bundle pricing
What is product line pricing?
Product line pricing is the process of setting prices across an entire product line, taking into account cost differences between products, as well as differences in customer perceptions of the value of different features.
What is optional-product pricing?
Optional-product pricing is a strategy used by companies to price optional or accessory products sold with the main product. Companies must decide which items to include in the base price and which to offer as options.
What is captive-product pricing?
Captive-product pricing is a strategy used by companies that make products that must be used along with a main product.
Producers of the main products often price them low and set high markups on the supplies, such as razor blades, printer cartridges, or video games.
What is two-part pricing?
Two-part pricing is a pricing strategy used in the service industry, similar to captive-product pricing. The price of the service is broken into a* fixed fee plus a variable usage rate.*
For example, amusement parks may have a daily ticket or season pass charge plus additional fees for food and other in-park features.
What is by-product pricing?
By-product pricing is a strategy used by companies to find a market for by-products generated during the production of the main product. This helps offset the costs of disposing of the by-products and makes the price of the main product more competitive. In some cases, the by-products themselves can become profitable.
What is product bundle pricing?
Product bundle pricing is a strategy where sellers combine several products and offer the bundle at a reduced price. This approach can promote the sales of products that consumers might not otherwise buy.
However, the combined price must be low enough to encourage them to purchase the bundle. Examples include fast-food combo meals, software packages like Microsoft Office, and telecommunications companies offering bundled TV, phone, and internet services.
