6.11:
Product Mix Pricing Strategies II
Businesses with diverse product offerings use product mix pricing strategies to optimize profits, elevate their products' perceived value, and offer varied pricing options to customers.
The automobile industry effectively illustrates these strategies. For example, Tesla's pricing of its Model S, Three, X, and Y based on features and customer-perceived value, catering to various consumer needs and budgets, demonstrates product line pricing.
BMW offering customizations like advanced navigation systems or leather upholstery at additional costs, exemplifies optional product pricing. It enhances profits and customer satisfaction.
Electric vehicle manufacturers' premium pricing for add-ons like home charging stations while selling competitively priced EVs exemplify captive product pricing. It ensures consistent post-purchase revenue and encourages customer dependence on the company.
General Motors utilizes by-product pricing, recycling most of its manufacturing waste or by-products to increase efficiency and lower car costs.
The Honda Civic's package deals, including the car, extended warranty, and maintenance services at a discounted rate to boost perceived value, demonstrate product-bundle pricing.
6.11 Product Mix Pricing Strategies II
The product mix pricing strategies are:
Product Line Pricing allows a company to offer a range of similar products that vary in quality, features, or style at different price points, like Apple iPhones. These are differently priced based on storage capacity and features.
Optional Product Pricing lets the business offer optional extras or valuable add-ons with the main product to maximize revenue, as in the automotive industry. Cars can be customized with optional features like a sunroof or advanced navigation systems, all at an additional cost.
In Captive Product Pricing, the businesses price the main product competitively while pricing the essential supplementary products higher, as seen with printers. The manufacturers sell printers at a low cost but charge more for cartridges.
By-product pricing allows the business to sell or reuse the by-products that result from the production of the main product. It helps offset production costs and competitively price the main product. For example, a sawmill sells sawdust (a by-product) to a company that makes wood pellets for heating.
Bundle Product Pricing combines several products and offers the bundle at a reduced price compared to buying each item separately, as seen in the fast-food industry.