Product line Pricing

Mohammed AsifMBA –TH : SEM-1 , 2015-17,NITHM

Subject: Managerial Economics andMarketing in Tourism & Hospitality

• PRODUCT LINE:A group of products that are clearly related because they function in a similar manner are sold to the same customer groups, are marketed through the same type of outlets or fall within given price ranges

• PRODUCT MIX: A Product Mix is the set of all products and items or the total range of products offered by a company.

• PRODUCT LINE PRICING: Product line pricing refers to the practice of reviewing and setting prices for multiple products in coordination with one another.)

INTRODUCTION

PRODUCT LINE OF NESTLE

Milk and Nutrition products

Infant Products

Beverages

Product line pricing

• It is the process that retailers use to separate goods into various cost categories creating different quality levels in the minds of their customers.

• Product line pricing is more effective when there are ample price gaps between each category so that the consumer is well informed of the quality differentials.

Product line pricing

• Pricing different products within the same product range at different price points.

• The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximizing turnover and profits.Ex: Samsung offering different smart phones with different features at different prices.

Product line pricing

In Tourism hospitality Industry

Example:The same category of rooms having different rates because of Amenities and facilities.

Example:The same sightseeing place experienced by different package rates because of optional services or luxuries.

Product line pricing

• This strategy is used for setting the price for entire product line. • In many companies now days develop product line instead of a single

product so product line pricing is setting the price on the basis of cost difference between different products in a product line.

• Marketer also keeps in mind the customer evolution of different features and also competitive prices.

Product line - pricing Strategies

There are five common product line pricing strategies • Captive pricing • Leader pricing, • Bait pricing, • Price lining, and • Price bundling.

Captive Pricing

• The idea behind captive pricing is that a company will have a basic product that they sell at a low price or given away for free.

• However, in order to receive the full benefit of the item they received, they have to buy additional products. The company might lose money on the base product, but they make a fairly good profit on the additional products.

• Ex: Gillette victor Handle, Cartridge

Leader Pricing• The idea behind leader pricing is to

generate store traffic. • The items used to get customers into

the store are known as Loss leaders. • When customers come into the store to

purchase the loss leaders, they usually end up purchasing extra items at full retail price.

• The retailer makes their profit off of the unplanned purchases bought with the loss leaders.

Bait Pricing• This type of strategy is usually viewed as unethical and sometimes

illegal, but retailers will still use it. • The customer will then come into the store to purchase the

advertised item then find the exact item is out of stock. They will then be encouraged to purchase a similar, higher-priced item that is available in store

Price Lining• Price lining is a strategy retailers use when pricing different

items at one specific price point. • The items are usually at a different level of quality or have

different features. This strategy usually makes it easier for a retailer to buy specific products, predict what their profits will be, and market to a certain consumer.

• EX: A good example of this would be Apple’s iPads. The basic iPad with wifi and limited storage costs $500. The next iPad is one with 4G and the same limited storage, but it costs somewhere around $650.

Bundled Pricing• Products that have several different options or accessories available

are sold using bundled pricing. • Instead of a consumer having to purchase each item separately, the

items are packaged together and priced as one item. • This is usually at a discount than what it would have been priced at

when purchasing each item separately.• Ex: Cars/ Bikes: When you are purchasing a new car/bike, you can get extra features by

bundling them with the car when you purchase it instead of purchasing them later