Captive product pricing is the pricing of products that have both a “core product” and a number of “accessory products.” It’s a pricing strategy that takes advantage of a product that will be used primarily to attract a large volume of customers .
How does captive pricing work?
Captive products are strategically used to maximize revenue . ... Low price are offered for the core product, but high prices are placed on captive products. This attracts customers to the core product with a low price but allows sellers to make a profit off the captive products, which are necessary to use the product.
What is captive product pricing example?
Captive pricing happens when an accessory product is necessary to purchase in order to use a core product. Classic examples of this include products like razor blades for razors and toner cartridges for printers . This is also called by-product pricing.
What are by product and captive product pricing strategies explain with examples?
We speak of captive product pricing when companies make product that must be used along with the main product. ... Examples for captive product pricing are razor blade cartridges and printer cartridges . Captive product pricing is an extremely powerful strategy in the set of product mix pricing strategies.
How can companies benefit from captive product pricing?
Captive product pricing increases sales of several products by offering core and accessory items that require each other for full use . Within the captive pricing strategy, core products usually require a one-time purchase of relatively low value.
What is an example of a captive brand?
Rather than marketing store brands as some lesser, cheaper alternative to brand name products, Wal-Mart, Walgreens, CVS and others are increasingly creating and promoting their own “captive brands.”
What is captive company strategy?
Captive strategy refers to a type of marketing and sales-based approach that persuades or limits the customer , buying a good or product initially, to continue buying prospective products from that one vendor.
What are the 5 pricing strategies?
- Price skimming. Skimming involves setting high prices when a product is introduced and then gradually lowering the price as more competitors enter the market. ...
- Market penetration pricing. ...
- Premium pricing. ...
- Economy pricing. ...
- Bundle pricing.
What is a captive brand?
A captive brand is a brand that is owned and sold exclusively by a retailer without evidence of this relationship .
What is the difference between optional pricing and captive pricing?
We speak of captive product pricing when companies make product that must be used along with the main product. On the contrary, in optional product pricing, we should think of products that can be bought/sold with the main product . Examples for captive product pricing are razor blade cartridges and printer cartridges.
What are the 5 product mix strategies?
- Product line pricing – the products in the product line.
- Optional product pricing – optional or accessory products.
- Captive product pricing – complementary products.
- By-product pricing – by-products.
- Product bundle pricing – several products.
What are the 6 product mix strategies?
- Product line pricing.
- Optional feature pricing.
- Captive product pricing.
- Two part pricing.
- By Product pricing.
- Product bundling pricing.
What are the major product mix strategies?
- Expansion of Product Mix. ...
- Contraction of Product Mix. ...
- Deepening Product Mix Depth. ...
- Alteration or Changes in Existing Products. ...
- Developing New Uses of Existing Products. ...
- Trading Up. ...
- Trading Down. ...
- Product Differentiation.
What is leader pricing strategy?
Leader pricing is a common pricing strategy used by retailers to attract customers . It involves setting lower price points and reducing typical profit margins to introduce brands or stimulate interest in the business as a whole or a particular product line. Products sold in this strategy are often sold at a loss.
What is an example of bundle pricing?
Typical examples of bundling include option packages on new automobiles and value meals at restaurants . In a bundle pricing scheme, companies sell the bundle for a lower price than would be charged for items individually.
It’s basic math—a higher price-per-unit leads to higher profit-per-unit sold. Premium pricing also improves brand value and the perception of your company . Not only does a premium-priced product accrue its own high-quality reputation, but it also improves the perception of the rest of your product portfolio.
