The Topic Product Line Pricing is Relevant for UGC NET Commerce & Management as Follows:
- UGC NET Commerce (Unit -VIII Marketing Management)
- UGC NET Management (Unit – VII Marketing Management)
Introduction for Product Line Pricing
Product line pricing refers to the practice of reviewing and setting prices for multiple products in coordination with one another. 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.
Example of Product Line Pricing
Samsung offering different smart phones with different features at different prices. 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. This strategy generally used through the growth maturity, and declining stages of the product’s life-cycle but not at introductory phase.
Common Product Line Pricing – Strategies
- Captive pricing
- Price lining
- Bait pricing
- Leader pricing
- Price bundling
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. The company might lose money on the base product, but they make a fairly good profit on the additional products.
Example : Gillette victor Handle, Cartridge
The idea behind leader pricing is to generate store traffic. The items used to get customers into the store are known as Loss leaders. The retailer makes their profit off of the unplanned purchases bought with the loss leaders.
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 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.
Example : A good example of this would be Apple’s iPads..
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.
Consider the following statements. Indicate the code for the correct ones:
1.Product line price strategy can be used if there are more than two products in the line.
2.Product line price strategy shall be used if there is clear enough differentiation of features and benefits.
3.Product line price strategy must be used only through the growth and maturity stages of the product’s life-cycle.
A. Only 1 and 2 is correct
B. Only 1 is correct
C. Only 1 and 3 is correct
D. All of the above are correct