Product Line Pricing

Companies usually develop product lines rather than single products. For example, Merloni's sells Indesit, Ariston and Seholte with price and -status ascending in that order. There arc full ranges of Indesit to Ariston appliances, from washing machines to freezers, covering the first two price hands, while Scholte sells expensive built-in kitchen equipment. Kodak offers not just one type of film, hut an assortment including regular Kodak film, higher-priced Kodak Royal Gold film for special occasions, and a lower-priced, seasonal film called Runtime that competes with store brands. Each of these brands is available in a variety of sizes and film speeds. In product line pricing, management must decidu on the price steps to set between the various products in a line.

The price steps should take into account cost differences between the products in the line, customer evaluations of their different features and competitors' prices. If the price difference between two successive products is small, buyers will usually buy the more advanced product. This will increase company profits i the cost difference is smaller than the price difference. Tf the price difference i large, however, customers will generally buy the less advanced products.

Table 17.1

Product-mix pricing strategies

Table 17.1

PRODUCT LINE

OPTIONAL-

CAPTIVE-

BY-PRODUCT

PRODUCT-BUNDLE

PRICING

PRODUCT

PRODUCT

PRICING

PRICING

PRICING

PRICING

Setting

Pricing

Pricing

Pricing

Pricing bundles

price steps

optional or

products that

low-value

of products sold

between

accessory

must be used

by-products

together

product line

products

with the

to get rid

items

sold with

main product

of them

the main

product

In many industries, sellers use well-established price points for the products in their line. Thus record stores might carry CDs at four price levels: budget, mid-line, full-line and superstar. The customer will probably associate low to high-quality recordings with the four price points. Even if the four prices are raised a little, people will normally buy CDs at their own preferred price points. The seller's task is to establish perceived quality differences that support the price differences."

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