Captive Product Pricing Example
3 Real-Life Examples of Captive Product Pricing. This is also called by-product pricing.
What Is Captive Product Pricing Definition And Overview
Captive Pricing Example.
. Game Consoles are the archetype of Captive Product Pricing. Captive Product Pricing Examples. Coffee-makers are a common example of captive product pricing.
Examples of Captive Product Pricing. You can use captive product pricing for many different types of products but there are several products and services that use captive pricing as an industry standard. Real-World Examples of the Pricing Strategy.
Sellers generally follow a product-mix pricing strategy when pricing captive products. Razor the core product is sold at a meager price whereas the blade and the cream the captive product is sold at a higher rate. Captive products are strategically used to maximize revenue.
Physical products with accessories or consumables are the most varied examples of CPP in action. Classic examples of this include products like razor blades for razors and toner cartridges for printers. On the other hand a pack of blades containing two cartridges costs around 12.
Razors Customers may notice that even buying a razor requires multiple purchases. For example the cell phone itself is the core product. For example a Razor handle and a blade costs 7.
Examples of Captive Product Pricing in the Real World. Therefore the phones wireless plan is the captive product. Printers and ink cartridges.
However captive products are not limited to physical goods. Captive pricing is a confusing concept for many but in practice its relatively simple. Manufactures of the major products mostly price them less and determine increased markups on the supplies.
Hence the price of camera is priced less by the producers because they create their money on the film it sells. Lets take a moment to look at a few examples of captive product pricing. How does captive pricing work.
Examples of captive products include camera film computer software razor blades and video games. Game consoles and joysticks printers and ink cartridges coffee machines and pods phones and subscription plans or razors and razor blades. The core product the gaming console like an Xbox would be useless without accessory products like the controllers games.
This is also called by-product pricing. The captive product scheme is pervasive in retail businesses because the complementary items exponentially cover the smaller profit margin from the base product. Considering the price of each cartridge to be 5 the razor costs only 2.
Captive products are strategically used to maximize revenue. In fact if you were to purchase all 53 kits and expansions it would cost 93990. Captive pricing happens when an accessory product is necessary to purchase in order to use a core product.
What makes this textbook captive product pricing is that the core product is the. For instance I recently sold an Xbox 360 for 300 and I got free shipping for the sale. A single serving coffee machine and coffee capsules Deeper Insights.
Razors are a great example of captive product pricing because there is the base product the razor handle and the cartridges the captive product. The 5-40 add-ons will add up. Some common examples of captive pricing include-1.
Here are some examples. You have likely used a razor at one point or another to shave some part of your body. Other examples include gaming apps that are free to play but come with a wide range of in-app accessories that users can purchase.
Classic examples of this include products like razor blades for razors and toner cartridges for printers. The captive pricing model can work if your product is a big budget item and you are willing to spend money on the buyer. Certainly if you have a cell phone with a wireless plan youve experienced the captive product pricing strategy firsthand.
Captive pricing happens when an accessory product is necessary to purchase in order to use a core product. Examples of captive product pricing.
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