What does captive product pricing mean?
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.
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 does captive product mean?
Captive product pricing is the pricing of products that have both a “core product” and a number of “accessory products.” It’s a pricing strategy that takes advantage of a product that will be used primarily to attract a large volume of customers.
What are some examples of captive product?
Examples of Captive Product Pricing Razors and razor blades. Printers and ink cartridges. Smartphones and wireless plans.
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 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 brand?
A captive brand is a brand that is owned and sold exclusively by a retailer without evidence of this relationship.
How can companies benefit from captive product pricing?
As mentioned before, businesses use captive product pricing because it helps them increase sales. If they sell a product that requires additional accessories, they’re almost guaranteed to have those same customers make additional purchases from them.
Why do companies use captive pricing?
What is by product pricing?
Setting the price for by-products in order to make the price of the main product more competitive. For example, in producing processed meats, chemicals, or oil there are often by-products, which – if they had to be disposed of – would make the main product uncompetitive.
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.