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Product Mix Pricing Strategies

Used when a product is part of a product mix, meaning multiple related products are sold together.

Types of Product Mix Pricing:

  • Product Line Pricing
  • Optional-Product Pricing
  • Captive-Product Pricing
  • By-Product Pricing
  • Product Bundle Pricing

1. Product Line Pricing

  • Setting different price levels for various products in a product line.
  • Prices are based on:
    • Cost differences between products
    • Customer perception of value and features
    • Competitor pricing
  • The goal is to make each product appear valuable to different customer segments.

2. Optional-Product Pricing

  • Pricing optional or extra products along with a main product.
  • Example:
    • A car may have a premium sound system or insurance as optional add-ons.
  • Companies decide:
    • Which items to include in the base price
    • Which items to offer as optional upgrades

3. Captive-Product Pricing

  • Pricing products that must be used along with a main product.
  • Companies use this strategy to increase profits on essential add-ons.
  • Examples:
    • Printer cartridges for printers
    • Razor blades for razors

4. By-Product Pricing

  • Pricing by-products to help reduce waste and make the main product more competitive.
  • Examples:
    • Buttermilk from the dairy industry
    • Rice bran used as animal feed
    • Chicken feet exported to China

5. Product Bundle Pricing

  • Combining multiple products and offering them at a discounted price.
  • Example:
    • A burger, fries, and a soft drink sold as a combo meal.
  • Benefits:
    • Encourages customers to buy more.
    • Increases sales of products they might not buy individually.
  • Factors to consider:
    • The bundle price must be low enough to attract buyers.
    • Giving customers the choice to buy items individually or in a bundle often leads to higher profits.
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