What is an example of captive product pricing?
Captive pricing happens when an accessory product is necessary to purchase in order to use a core product. Classic examples of this include products like razor blades for razors and toner cartridges for printers. This is also called by-product pricing.
What is captive product pricing strategy?
For instance, captive product pricing is a pricing strategy devised to attract a large volume of customers to a one-time purchase of a lower-priced core (or main) product that requires accessory (or captive) products for the main product to function. Consequently, companies might initially lose core product sales.
How can companies benefit from captive product pricing?
Use Captive Product Pricing to Increase Business Sales When executed right, captive product pricing can increase sales and build a base of loyal customers that are ready and excited to purchase accessories to enhance the experiences they get from your products.
Who uses captive pricing?
What is captive pricing? Captive pricing is a two-step strategy used by companies who develop products that have both a core component (e.g. a Nespresso machine), as well as various accessories that enhance its features and/or functions (e.g. coffee pods).
What is an example of a captive brand?
Some examples of captive products include refill cartridges for pens, replacement pods for specialty coffee machines and razor blades that work only with a certain brand of razor.
What is captive product pricing and optional product pricing?
We speak of captive product pricing when companies make products that must be used along with the main product. On the contrary, in optional product pricing, we should think of products that can be bought/ sold with the main product.
What is captive product pricing quizlet?
Captive-Product Pricing. Involves products that must be used along with the main product. By-Product Pricing. Refers to products with little or no value produced as a result of the main product. Producers will seek little or no profit other than the cost to cover storage and delivery.
What is geographical pricing strategy?
Geographical pricing is a pricing strategy where a business adjusts the price at which it sells a given product on a regional basis — charging different prices in one area than it does in others. It’s typically used to recoup shipping costs or create the impression of regional scarcity, novelty, or prestige.
What is captive company strategy?
It is a strategy that is pursued when a firm sells the bulk of its products to one customer (wholesaler/ dealer), who in turn performs some of the functions commonly done by an independent firm. The primary shortcoming of this strategy is that the organization is restricted by the actions of its captor.
What is the simplest pricing method?
Cost-plus pricing is the simplest pricing method. A firm calculates the cost of producing the product and adds on a percentage (profit) to that price to give the selling price. This appears in two forms: the first, full cost pricing, takes into consideration both variable and fixed costs and adds a % markup.
What are the 5 types of geographical pricing?
Types of Geographic pricing
- Uniform delivery pricing –
- Zone pricing –
- Basing point pricing –
- Freight-absorption pricing –
What is the example of geographical pricing?
a pricing method in which customers bear the freight costs from the producer’s location to their own; examples of geographical pricing include FOB pricing, base-point pricing and zone pricing.
What is captive pricing and how to use it?
Captive pricing must be done carefully, for the pricing of a core product could affective the value of a captive product, and vice versa. Captive pricing is often used by companies that have perishable product attachments, like ink for printers.
Does the pricing of a core product impact the captive product?
Make note—captive product pricing must be done carefully because the pricing of a core product could impact the perceived value of the captive product and vice versa. You’ve definitely seen captive product pricing before, without even realizing it.
What is an example of a captive product?
Video game consoles are typical examples of captive product pricing. The core product is the gaming console, like an Xbox, that may be nice to have but worthless without the accessories. So, the captive products are controllers, games, and any additional accessories that make having an Xbox worth it.