Optional product pricing

Optional product pricing
See also

The term optional product pricing determines the pricing of accessory or optional products along with the main product. Companies in this type of pricing offer to sell accessory or optional products along with their main products. One of the examples is the Honda Accord buyers have tendered pricing options if they were going to pay by cash. They had a choice to select from one of the following :

  • shift knob and wooden steering wheel,
  • hand free car kit for handy phone,
  • wooden dash panel and
  • wrap around skirt.

This choice was tendered to the buyers if the buyers purchase for that time period a Honda Accord[1].

A similar example is another car buyer who can choose to order Bluetooth wireless communication and a GPS navigation system. Moreover, refrigerators come with optional ice makers. However, when you order a new personal computer, you might select from:

  • software options,
  • decking systems,
  • a bewildering array of hard drives,
  • service plans and carrying cases.

Pricing this choice is a sticky problem. Automobile companies have to decide which items to offer as options and which to contain in the base price. General Motors' normal pricing strategy until recent years was to promote a stripped-down model at a base price to bring people in showrooms and later to devote most space of the showroom to showing option-loaded cars at upper prices. The economy model was devoided of so many conveniences and comforts that most buyers rejected it. Afterward, General Motors and other the United States automakers followed the examples of the German and Japanese companies and contained in the sticker price a lot of useful items previously sold only as options. Therefore, today most advertised prices represent well-equipped cars[2].

Captive product pricing[edit]

Captive product pricing is setting a price for products that have to be used along with the main product. Examples of captive products are:

  • video games,
  • printer cartridges and
  • razor blade cartridges.

Producers of the main products (printers, video game consoles, and razors) frequently price them low and set high markups on the supplies. The example is Gillette which sell low-priced razors but otherwise makes money on the replacement cartridges. Companies that use captive product pricing have to be careful because consumers trapped into buying expensive supplies might come to reset the brand that ensnared them[3].

Footnotes[edit]

  1. (F.C. Young, C.M. Pagoso 2008)
  2. (P. Kotler, G. Armstrong 2010)
  3. (G. Armstrong, S. Adam, S. Denize, P. Kotler 2014)

References[edit]

Author: Alicja Ryszka