Strategic Pricing – Marketing Product Line Tactics

When you have to set prices for a closely related set of products indicative of industries like cosmetics or computers for example, you are faced with the marketing task of pricing interrelated products. Such strategies with pricing decisions are used to develop specifications for offering multiple brand products set at specific prices. You want to systematically satisfy your customers by appealing to customer diversity, while continuously generating revenue. The pricing mechanisms that provide promotional premiums in consumer goods and services include:

1. Price Bundling:

This method takes a set of products assembled in a package that would be presented with a price that is lower than the cost of individual modules. Sometimes these packaged items consist of components that are slow sellers. Quite often, these slow movers will get more attention in a packaged presentation than they would individually. In some cases, if a customer wants to substitute an unwanted item, there may be an alternative allowance for that. However, in many cases, depending on the company and the bundled items, substitutions are not permitted.

2. Product-line:

This method involves a company offering a high and a low-priced brand; multiple brands in diverse price levels. This strategic pricing ensures that a company will cover most targeted customer segments than their competitor and give customers very little incentive to purchase a similar item from its competitor. For example, L’Oreal, a popular mass-marketed cosmetics company, carries a wide variety of mascara from its original mascara, to a lengthener, from high volume and waterproof to double extended. Although the prices vary depending on the purpose of its intensity and consumer benefit, it offers a variety of mascara to fit diverse needs and cover most customer segments. With such a variety, L’Oreal makes it tough for consumers to buy mascara from their competitors.

3. Complementary Pricing:

This method applies to items used together, where one of the items must be replenished continually because it is consumable. Such examples can include a plug-in air freshener and its disposable refills, or a printer and replaceable cartridges. This method is used when there is limited competition for these consumable items. This approach is also applied to services that have a fixed monthly fee and a variable usage fee (e.g. Telephone services). Complementary pricing is designed to keep marginal costs low for consumers, but preserve a continuous flow of revenue for the company.

Observing the buying behavior of your customers by trying to respond favorably as you determine their needs and wants through communications and buying history, assist in determining your company’s short and long-term goals. Providing convenience and quality at a premium price for improved customer retention, by building and maintaining a good relationship comes from listening to customers concerns and needs, thus laying the foundation for building long-term relationships.