Product mix pricing strategies involve setting prices for multiple related products to maximize overall profits. Key strategies include: 1) Product line pricing which sets price steps between similar products like "good-better-best". 2) Optional product pricing where high margins are set for optional accessories to generate profits. 3) Captive product pricing which recovers costs through high margins on supplies that must be used with the main product. 4) Two-part pricing uses a fixed fee plus variable usage rates for services like cellular plans or amusement parks. Pricing by-products and product bundles also aims to earn extra profits or clear excess inventory.

1. Product mix pricing strategies

2. INTRODUCTION
• We need to set price when we have a new
product, or when we enter a new market with
an existing product
• How?
– Need to decide what position you want your
product to be in.
2

3. Why pricing strategies

4. PRODUCT MIX AND PRICING
• Price-setting logic must be modified when, the
product is part of a product mix.
• The firm searches for a set of prices that
maximizes profits on the total mix.
• Pricing is difficult because the various
products have demand and cost
interrelationships and are subject to different
degrees of competition

6. STRATEGIES
• Product Line Pricing
– Setting price steps between product line items.
• When firms offer consumers a choice of price-
quality levels – the “good-better-best” choice
– a challenge for managers is how to set price
differentials

7. EXAMPLE-TOYOTA

8. • Optional-Product Pricing
– Pricing optional or accessory products sold with
the main product
– EXAMPLE
– RESTAURANTS

9. OPTIONAL PRODUCT
PRICING
In Restaurants Customers
can often order liquor in
addition to the meal. Many
restaurants price their
liquor high and their food
low. The food revenue
covers costs, and the liquor
produces the profit. This
explains why servers often
press hard to get
customers to order drinks.
Other restaurants price
their liquor low and food
high to draw in a drinking
crowd.

10. • Captive-Product Pricing
– Pricing products that must be used with the main
product
– High margins are often set for supplies
• EXAMPLE
• Cellular service operators

11. Captive-product pricing
A cellular service
operator may give a
cellular phone free if
the person commits to
buying two years of
phone service.

12. Service:- two-part pricing strategy
• Fixed fee plus a variable usage rate
EXAMPLES
• Amusement parks
• Telecom operators
• The service firm faces a problem similar to
captive -product pricing-namely, how much to
charge for the basic service and how much for
the variable usage

13. two-part pricing strategy
Telephone users pay a
minimum monthly fee plus
charges for calls beyond
the minimum number.
Amusement parks charge
an admission fee plus fees
for rides over a certain
minimum.

14. • By-Product Pricing
– Pricing low-value by-products to get rid Of them or to
earn extra margin in profit.
• If the by-products have value to a customer
group, they should be priced on their value. Any
income earned on the by-products will make it
easier for the company to charge a lower price on
its main product if competition forces it to do so.
• EXAMPLE
• In the timber industry

15. By-Product pricing
In the timber industry, for
example, by-products
include sawdust, small
offcuts and bark.

16. • Product Bundle Pricing
– Pricing bundles of products sold together
• When offering a mixed bundle, the seller
normally charges less for the bundle than if
the items were purchased separately.
• Good way to test market for a new product or
to clear the stock.
• EXAMPLES
• Resorts,Airfare deals etc.

17. Product Bundle Pricing
A theatre company will price a
season subscription at less
than the cost of buying all the
performances separately or
some combo offers in movies.
Because customers may not
have planned to buy all the
components, the savings on
the price bundle must be
substantial enough to induce
them to buy the bundle.