Product Mix pricing strategy

Question 1

What are the different product mix pricing strategies:

Answer 1

1_Product line pricing
2_Optional-Product pricing
3_Captive product pricing
4_by-product pricing
5_Product bundle pricing

Question 2

Product line pricing

Answer 2

-Product line pricing
Setting the price steps between
various products in a product line
based on cost differences between
the products, customer evaluations
of different features, and competitors’
prices.

Companies usually develop product lines rather than single products. In product line pricing,
management must determine the price steps to set between the various products in a line.
The price steps should take into account cost differences between products in the line.
More important, they should account for differences in customer perceptions of the value
of different features.

Question 3

Optional Product pricing

Answer 3

The pricing of optional or accessory
products along with a main product.
For example, a car buyer may choose to order a navigation system and premium entertainment system.
Pricing these options is a sticky problem.
Companies must decide which items to include in the base price and which to offer as options.

Question 4

Captive-Product pricing

Answer 4

Setting a price for products that must
be used along with a main product,
such as blades for a razor and games
for a video game console.
–Examples of captive products are razor blade cartridges, video games, printer cartridges, single-serve coffee pods, and e-books.

Captive products can account for a substantial portion of a brand’s sales and profits.
However, companies that use captive-product pricing must be careful. Finding the right balance between the main-product and captive-product prices can be tricky. Even more, consumers trapped into buying expensive captive products may come to resent the brand that ensnared them.

In the case of services, captive-product pricing is called two-part pricing. The price of
the service is broken into a fixed fee plus a variable usage rate.

Question 5

By-Product pricing

Answer 5

Setting a price for by-products to help
offset the costs of disposing of them
and help make the main product’s
price more competitive.

If the by-products have no value and if getting rid of them is costly, this will affect the pricing of the main product.
Using by-product pricing, the company seeks a market for these by-products to help offset the costs of disposing of them and help make the price of the main product more competitive. The by-products themselves can even turn out to be profitable—turning trash into
cash.

[For example, cheese makers in Wisconsin have discovered a use for their leftover
brine, a salt solution used in the cheese-making process. Instead of paying to have it disposed
of, they now sell it to local city and county highway departments, which use it in
conjunction with salt to melt icy roads.]

Question 6

Product Bundle pricing

Answer 6

Combining several products and offering the bundle at a reduced price.
sellers often combine several products and offer the
bundle at a reduced price.
Price bundling can promote the sales of products
consumers might not otherwise buy, but the combined price must be low enough to get them to buy the bundle.