Product line, Product MIX, Product line pricing, and product line pricing all refer to the practice of reviewing and coordinating the pricing of a number of products. (Retailers use this method to divide products into different cost categories, which causes customers to perceive different quality levels. When there are significant price differences between each category, product line pricing is more effective and the consumer is better informed of the quality differences. Pricing various goods from the same product line at various price points The more features and benefits a consumer receives, the more they will pay. This kind of price discrimination helps the business increase sales and profits. Ex: Samsung offers various smart phones with various features at various prices. The entire product line’s price is set using this method. Product line pricing is the practice of setting the price based on the cost differences between the various products in a product line. These days, many businesses develop product lines rather than just one product. Additionally, marketers are mindful of how customers respond to evolving features and low prices.
Product line, Product MIX, Product line pricing, and product line pricing all refer to the practice of reviewing and coordinating the pricing of a number of products. (Retailers use this method to divide products into different cost categories, which causes customers to perceive different quality levels. When there are significant price differences between each category, product line pricing is more effective and the consumer is better informed of the quality differences. Pricing various goods from the same product line at various price points The more features and benefits a consumer receives, the more they will pay. This kind of price discrimination helps the business increase sales and profits. Ex: Samsung offers various smart phones with various features at various prices. The entire product line’s price is set using this method. Product line pricing is the practice of setting the price based on the cost differences between the various products in a product line. These days, many businesses develop product lines rather than just one product. Additionally, marketers are mindful of how customers respond to evolving features and low prices.
Lesson 6 video 2 New Product Pricing Strategies & Product Mix Pricing Strategies
Why companies use product line pricing
Here are the top two justifications for why businesses use product line pricing:
Create a price differential
The cost difference between two or more products or product types is known as a price differential. In order to cultivate a sense of elitism or financial success in customers who can afford the product at the higher end of the differential, companies use the psychology of the price gaps created by using a product line price model. The ability to purchase a product with the same brand name or level of recognition as the item at the higher end of the price differential also gives buyers at the lower end of the price differential a sense of accomplishment.
Expand market reach
Companies can market to customers with low-end, mid-range, and high-end budgets by using product line pricing. A business can reach a much wider range of customers by offering two, three, or more product tiers, which increases their chances of making more sales and boosting their brand recognition.
What is product line pricing?
Product line pricing is a multi-tiered system for marketing and selling a company’s goods and services. Product line pricing is a tool used by businesses to instill in the minds of their target customers a perception of various product quality levels. Many businesses aim to establish an air of exclusivity with their brand or higher tier products using product line pricing, and businesses frequently have completely different marketing campaigns for each of their various product tiers.
5 product line pricing strategies
Here are five pricing techniques that businesses or retailers frequently employ along with product line pricing.
Domino effect pricing
An approach to product line pricing known as “domino effect pricing” holds that the price of one item, or the cost associated with the base model, can have an impact on future prices for similar products and upgrades for higher tier purchases.
A business can slightly raise the price of its lower-tier products if it wants to increase revenue from its high-end products. Customers or prospective customers in the higher tier market are probably going to anticipate a specific price difference between the two product lines. Therefore, businesses can increase the price of higher-tier products without risking customer loss or other negative effects.
Captive pricing
Utilizing an alluring base product to draw in and keep customers, captive pricing is a method of product line pricing. Customers are then encouraged to purchase add-ons or additional complimentary items after the baseline, which typically has an alluringly low price, is offered. The extras ought to enhance the functionality of the primary item or otherwise contribute to the customer’s satisfaction with their purchase.
Bundle pricing
Bundle pricing is a method of product line pricing where a business or retailer packages or bundles a number of related products together. The total cost of the items in the package or bundle is typically less than the sum of the individual prices. Customers are encouraged to purchase more items thanks to this system. As a result, each transaction’s total sale price is increased while also giving the impression to the buyer that they spent less money than they would have otherwise if the package or bundle had not been made available.
Leader pricing
An aspect of product line pricing known as “leader pricing” involves a company making a claim to be the best supplier of a product at the lowest price. This claim may occasionally be a part of the company’s overall business strategy, or it may be part of a promotion or limited-time discount. This strategy seeks to increase in-store or online traffic, with the idea that higher levels of sales will result from customers making additional, impulsive, or unplanned purchases.
Bait pricing
In order to draw customers into retail stores, a retailer may use a tactic known as “bait pricing,” which is somewhat similar to “leader pricing.” The duration of availability and the intent to purchase are different in this strategy. There is typically a very small supply of the advertised item, and bait pricing is only available for a very brief period of time.
Additionally, bait pricing relies on a salesperson’s ability to persuade a customer to buy something other than the item they initially intended to, whereas leader pricing heavily depends on the hope that a customer will buy additional items. This product is typically comparable to the one being advertised, but it costs more, has more features, or is vastly improved over the original.
Examples of product line pricing
Three consumer industries that frequently use product line pricing are listed below:
Mobile phones
The majority of mobile phone manufacturers benefit from product line pricing by including two or three higher tier models in addition to the baseline models with each new model they release. Baseline models, for instance, may include fundamental storage capabilities and features. While more expensive or elite models might have twice the storage, better cameras, and features like wireless charging or fast streaming or gaming
Additionally, these models are typically upgraded every year or every two years, which adds to the product line pricing model because the mobile phone industry is heavily dependent on constantly evolving technology. These businesses also benefit from the accessories and extras that facilitate captive pricing and bundle pricing.
Automobiles
The automotive sector frequently employs product line pricing, which involves creating a minimum of three product tiers with distinct design, features, and technological advancements for each. A base car model, for instance, might have fabric seats, a manual transmission, and other manual features. While more expensive models might have upgraded features like voice navigation, heated seats, and luxury textiles.
Larger cargo spaces and automated features like parking assistance, backup cameras, and anti-lock brakes are frequently found in more expensive products. Automobile manufacturers can sell their wares to a variety of customers in various markets by providing a multi-tier product line.
Retail shopping
Additionally typical in other retail shopping scenarios is product line pricing. This pricing strategy is particularly popular in retail clothing stores. In order to market and sell their various product types, businesses occasionally offer multi-level products within a single store, and other times they create multiple brands or stores.
The fabrics, intended durability, and design elements frequently change within each tier. In retail clothing stores, product line pricing broadens the market’s reach and is especially effective in growing a clientele and boosting brand recognition. Furthermore, domino effect pricing and leader pricing are frequently advantageous for product line pricing in this sector.
FAQ
Why is product line pricing?
Product line pricing. When a company has multiple products in a product line, it will use product line pricing as a pricing strategy. In order to convey different quality levels to customers, traders divide products from the same category into a range of price points.
What is a product line example?
Product Lines Examples The company’s product lines include clothing, footwear, and equipment. Frito Lay, Gatorade, Quaker Oats, and Tropicana are just a few of the international brands owned by PepsiCo (PEP). 1. Coffee, ice cream, and drinkware are just a few of Starbucks Corporation’s (SBUX) numerous product lines.
Who uses product line pricing?
Additionally typical in other retail shopping scenarios is product line pricing. This pricing strategy is particularly popular in retail clothing stores. In order to market and sell their various product types, businesses occasionally offer multi-level products within a single store, and other times they create multiple brands or stores.
What is a price line strategy?
Price lining is a marketing tactic that groups goods and services according to their characteristics and overall worth to consumers. This strategy offers multiple pricing options for comparable products in an effort to increase sales for a business.
