What Is the Difference in Product Mix Pricing?

Introduction

Marketers should keep the price factor in mind when a product is part of the product mix. They should continuously modify the price-setting criteria so that they can remain competitive in the market. Product mix pricing is the process of setting the price that maximizes the profit on the total mix.

Pricing is difficult because different products have different demand and cost relationships, and are open to varied degrees of competitiveness. Now there are different situations for product mix pricing. Let's discuss them one by one −

Product Line Pricing

So in this pricing model, companies generally develop different product lines for a single product and introduce different prices. This method of product mix pricing is very common in different lines of trade where the sellers use well-generated product points in their line.

For example, when we go to a clothing shop to buy a shirt, there are different types of shirts at different prices. Customers can choose between a cheap, average, or high-priced product. Here, the main aim is to establish the difference between the quality of different valued products.

Optional Feature Pricing

Many companies allow optional features to be included with the main product. They could be additional products or services. For example, when we buy an automobile, we can order power window controls, remote adjustable mirrors, a sunroof, and theft protection. Now here comes the main thing: deciding which items to include in standard pricing and which to provide as offers.

Automobile companies invest a lot in the advertisement of low-cost entry models so that a wide variety of customers come into the showroom. Many automobile companies often attach various features to the economy model so as to grab the customers, and if not, the customers end up spending additional money to buy the different applied services and products.

Captive Product Pricing

Some products, like cameras or phones, often require the use of additional useful products, or they might be called captive products. The different manufacturers of such products set high mark-ups on the ancillary or captive products. But there is danger in adopting this price mix model because there are different cheaper substitutes available in the market for these captive products, which can hamper sales.

For example, a customer can buy the same printer with a good amount of discount rather than buying the main company printer. When the captive products are too expensive, the customer will definitely look for alternatives.

Two-Part Pricing

Two-part pricing basically means charging subordinate variable fees along with the main primary regular fees. Let's understand it with two examples. Let's take the example of the telephone. There is a basic regular charge to it, along with a variable charge if we go beyond a certain limit.

The same goes for the amusement park. There are certain admission fees and extra fees for rides over a certain limit. Now the main challenge in this model of pricing is to ascertain the charges for primary fees as well as subordinate fees.

Firms really face a problem deciding how much to charge for basic services and how much to charge for variable usage. The fixed price in this model should be low so as to excite the purchase of the service, and the profit can be maintained after the complete use of the services.

By Product Pricing

Certain types of companies, such as petroleum products and chemical companies, charge for the by-products. In this way, they can lower the main product price so as to remain ahead of the competition in the market.

Product Bundling Pricing

This type of price-mix model is very common among tour companies. There are now two types of bundling. One is pure, the other is mixed. Your packages offered by different tour companies in South Asia that include travel costs, sightseeing costs, lodging costs, and food expenses for a 14-day tour are a pure mix model. In mix bundling, companies offer goods and services both individually and in bundles.

For example, a cinema hall will charge a season subscription at a lower cost than buying the tickets individually. In this model, a customer can ask for the unbundling or rebuilding of the different services associated with it. There are certain suggestions when choosing the product bundle pricing. 1. We should not promote individual products in the bundle as cheap. 2. We should limit the promotion of a single item in the mix. 3. We should avoid giving large rebates on individual items, and if we want to, we should also do it at our discretion.

Conclusion

So setting a price is the most difficult and, at the same time, most important product in the product mix. Many customers see and notice this as a primary factor while purchasing the product. The different models of pricing mix help the companies establish their position in the competitive market.