FIVE PRODUCTS MIX PRICING DECISION
FIVE PRODUCTSMIX PRICING DECISION
Five products mix pricingdecision
Five products mix pricingdecision
Although marketing strategiesare complex and have several facets, pricing is one of the mostimportant components. The pricing strategy adopted by a manufacturercan have a significant influence on the volumes of sale and profitsaccrued from a product. Product pricing will also a direct orindirect impacts on the market share of the product or company. However, there are several factors that inform product pricing.Pricing is a more strategic tool when a company has a product mix. Aproduct mix is a situation where a producer has a line of productsoffered in the market. In this case, the pricing strategies adoptedby the organization may have different objectives from a producerwith one product in a market. The producer will offer prices thatwill maximize profit by selling a line of products. The five productmix pricing strategies can be used to make pricing decision for a mixof products. They include “product-line pricing optional-productpricing captive-product pricing by-product pricing, andproduct-bundle pricing” (Armstrong,2014).
Product Line Pricing
Allproducts have perceived or real quality in the market. A producer canuse it in making pricing decisions. The product line pricing givespricing gaps by categorizing the products in the market. The pricegaps can be used to alert the buyers on the differences in qualitiesof the goods. The pricing gap can also be based on the cost differentbetween the two products. This means that higher quality goods havehigher cost of production and therefore higher prices. Retailersdealing with a product mix have also used product line pricing todistinguish the quality of goods on offer (Charles, 2012).
Thisis a strategy in which a company indicates the price of the basicproduct to the customer but offers a different price for essentialaccessories. This enables to company make more profits by sellingadditional products. Additionally, this strategy allows the companyto eliminate the perception that the product is expensive. Thisstrategy is common among car and mobile phones manufacturers (Ahmed,2014).
Someproducers offer supplies to their key product in the market. This isin cases where the main products is sold separately but requireanother product to be used alongside. The price may adopt a strategywhere they set a low price for the main product to pay for the costof production but get profits from the prices of supplies usedalongside the main product (Moore,2006).For example, a printer may be reasonably cheap but the ink cartridgewhich must be used alongside the printer may be substantiallyexpensive. Another example is computers which are relatively cheapbut require particular software from the manufacture, which may beexpensive. Other products require services, for example, maintenancefrom the manufacturer where the profits are obtained from the aftersale services (Armstrong,2014).
Allproducts for a manufacturing process have some by products. However,some by product have some value while others have no value. Forexample, lanolin is a high value by product of wool processing. Ifthe by product is marketable, the producer may decide to lower theprice of the main product and take advantage of the value of the byproduct. This will increase the competitiveness of the main product(Armstrong,2014).
Thisstrategy is employed by producers who can offer their products in abundle at a reduced price. Some good examples include cabletelevision, cosmetic companies and fast food companies. This enablesthe producers increase sales of product with lower demand. However,not all products from a manufacturer can be bundled together (Ahmed,2014).
Ahmed,G. (2014). Productmix pricing strategies in marketing,http://www.studylecturenotes.com/mba-marketing/product-mix-pricing-strategies-in-marketing
Armstrong,G et al. (2014). Principlesof Marketing,ISBN 486002536, Pearson Australia.
Charles,W. (2012). Essentialsof marketing,Mason, Ohio: South-Western Cengage Learning.
Moore,K. (2006). Marketing:The Basics,New York, NY,Taylor & Francis.