Product Line Pricing

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Product Line Pricing

Product Line Pricing or Price Lining is the process used by manufacturers and retailers of separating goods into cost categories in order to create various quality levels in the minds of customers. Effective product line pricing by a firm will usually involve putting sufficient price gaps between categories to inform prospective buyers of quality differentials.
Normally companies have a range of products (rather than single products). Pricing then typically starts at the most basic, simplest product. As we go up the product line, features or other differentiators are being added to the product and the price is increased accordingly.

ASPECTS OF PRODUCT LINE PRICING

• The difference in the price from one product to the next level is called a "price step".
• The amount (size) of the price step needs to be planned carefully as it may change consumers' perceptions.
• If the step is too small, consumers may pick up a product higher in the product line too easily.
• If the price is too large then consumers may prefer the product lower in the product line.

THE 3 C's of PRODUCT LINE PRICING
Price steps are actually based on 3 C's:

• Cost Difference between the 2 products;
• Customer perception of the difference; and
• Competitor's prices.

If a price step is larger than the cost then the company benefits when customers buy a higher version of the product.
Example: Models of mobile phones such as iPhone 11 (64GB, 128GB & 256 GB) and iPhone 11 Pro, etc.

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		2 Anonymous
	Pricing Techniques Using Product Lines Several (similar) pricing tactics and techniques can be applied using a product line: 1. Captive Pricing. A product at the lower end of the product line is primarily used to attract a large volume of customers. That product could actually be sold at a negative margin (a loss) leader of even given away for free. The point of this product is to encourage a customer to buy additional products that enhance their original purchase. 2. Discount / Leader Pricing. This involves the abundant use of discounting: putting many items on discount will create more store traffic. Once the customers are inside your store or web page, they're likely to pick up other, full-priced articles or accessories for the discounted item they're buying. 3. Bait pricing. This involves offering a sale on an item that is in limited supply. The bait pricing will drive customers to the store or website, where you can offer them a similar, higher-priced item once the item on sale is sold out. 4. Bundle Pricing. This involves packaging several related items together as one item. Perhaps there are more?