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Captive Pricing Strategy by Neil Kokemuller Captive pricing is common with cameras because customers purchase components and related products. The strategy for product mix pricing strategy is setting a products price often has to be change when the product is part of a product mix.
The type of  product mix pricing strategy deals with setting the price steps between various products in a product line based on cost differences between the products, customer evaluation of different features competitors prices. Setting a price for products that must be used along with a main products such as blades for a razor.In the Captive Pricing Product Mix Pricing Strategies Producers of the main products often price the products low and set high mark ups on the supply. This particular type of product mix pricing strategy is setting a price for byproducts  in order to make the main products price more competitive. With complementary pricing, one of two complementary products are priced low, just to cover the costs with little to no profit margin.
Market Share Leadership – lower prices increase demand so that future volume brings profit. Other cost orientated approaches include Break Even Analysis which identifies the minimum pricing level for a given quantity. Competition Based Pricing involves setting prices based on competitors’ strategies, costs, prices & market offerings (is the product perceived as more [can charge higher price] or less [charge lower price or change perceptions] value?).
Location Pricing – preferences where different locations have different perceived values e.g. Pricing Products: Pricing Considerations and Approaches Pricing Strategies Chapter 10 - 11.
4 Definition Price ? The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.
17 Factors to Consider When Setting Price Marketing objectives Marketing mix strategies Costs Organizational considerations Who sets the price? 33 Cost-Based Pricing: Break-Even Analysis and Target Profit Pricing ? Break-even charts show total cost and total revenues at different levels of unit volume. 36 General Pricing Approaches Value-Based Pricing: ? Uses buyers’ perceptions of value rather than seller’s costs to set price. The product mix is the collection of all those products and services that a particular company offers in the market.
The number of all product of similar nature or kind offered by a particular seller for sale.
This strategy is used to set the price of optional products or accessories along with a main product. This is strategy used for setting a price for a product that must be used along with a main product, for examples blades with razor and films with a camera.
By-product pricing is determining of the price for by-products in order to make the main product’s price more attractive and competitive.
In the Product Mix Pricing Strategies case the firm looks for a set of prices that maximizes the profit on the total product mix.
A great example of Optional Product Mix Pricing Strategies would be refrigerators that comes with optional built in ice makers.

In the case of services this strategy is called two part pricing where the price of the service is broken into a fix fee plus a variety usage rate.
Price bundling Product Mix Pricing Strategies can promote the sales of the products consumers might not otherwise buy, but the combined price must be low enough to get them to the bundle.
Don’t forget to click the link below to get access in more detail information on the Product Mix Pricing Strategies.
The other product, which is necessary for the printer to operate, is priced very high with a very high profit margin. It involves adding a standard mark up to the cost (production, distribution & selling costs) of the product. Target Profit Pricing which links price to profit objectives above total costs, but ignores the law of demand. It uses the buyer’s perception of value (not costs –hard to determine) as the key determinant of the price & utilises non price mix variables to help set a perceived value in the buyers mind. Dynamic Pricing on the Web allows SELLERS to: ? Monitor customer behavior and tailor offers.
Pricing strategy helps to increase a company’s product or service sales in selected market.
For example refrigerator comes with optional ice maker or CD players and sound systems are optional product with a car.
It is the only ‘mix’ that produces revenue (& is flexible), all other elements are costs. Firm must consider price impact on sales volume needed to reach target profits & the likelihood that the needed volume can be achieved.
If the market is dominated by large low cost producers, a firm may target unserved niches with value added products at higher prices e.g. Competitors will react particularly if there are only a few sellers with uniform products & buyers are well informed. Identify and define the external factors affecting pricing decisions, including the impact of consumer perceptions of price and value 3. So product line pricing is setting the price on the base of cost difference between different products in a product line.
Organizations separate these products from main product because organizations want that customer should not perceive products are costly. Price is a key part of the overall value proposition by creating customer value & building customer relationships.
So we can say that pricing is one of the most important factors of a company’s marketing mix strategy. Marketer also keeps in mind the customer evolution of different features and also competitive prices.
Once the potential customer comes to the show room, organization employees explain the benefits of buying these optional or accessory products. Now if company sells husk and brain oil to other consumers, they will generate extra revenue by adopting this by-product pricing.

This strategy helps many companies to increase sales, and to get rid of the unused products.
This technique is successful because once you have invested in the printer; you are required to purchase the complementary ink unless you are willing to invest in a new printer. Firms don’t set a single price; they adopt a pricing structure that covers different products in different lines. Before proceeding towards the main topic “product mix pricing strategies in marketing” first you should be aware of this common marketing terms “product mix or product portfolio”. Companies avoid competitors selling ink for their printers by having unique cartridges. Captive pricingOften when consumers purchase a product they want to enhance the value of that product by buying the accessories or complementary products that facilitate it.
Value Based Pricing entails Target Costing – ideal selling price is set on customer perceived value & costs are targeted to ensure that price is met. If products are less differentiated & more substitutable consumers will be price sensitive. The company settles for little to no profit on the base product and cleans up with high profit margins on the other products once customers are hooked.
Once you have invested in the printer or razor you will likely remain loyal to that brand and you will buy the complementary product. Video game systems often are sold at little to no profit, but the games and accessories typically have steep mark-ups. When the Nintendo Wii launched in November 2006 at a modest price of $250, distributors and retailers couldn't get systems in stores fast enough for customer demand. Nintendo continues to market the system and add new games, accessories and unique attachments, such as fitness packs and archery equipment. Computers, cameras and single-cup home coffee systems also are sold with captive pricing because they can be marketed with a number of components, add-ons or additional purchases.
Often, the more significant the initial purchase, the more likely customers are to continue purchase necessary components and products over time.
By keeping customers hooked to your products and brand, you also have greater opportunity to market and promote new versions or unrelated products to them. A portion of the audience may feel duped by the lure of a low-priced product only to pay perpetually to use it.
Additionally, the provider must maintain strong investment and commitment to offer the components and products necessary.
Video game companies, for instance, must deliver an array of game offerings for an extended period of time to maintain a strong enough brand image to get customers to buy the next version of a system when it is launched. FerrellUniversity of North Texas: Product Line Pricing Strategies About the Author Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007.

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