Product Mix Pricing Strategies
The strategy for setting a product's price often has to be changed when the product is part of a product mix. In this case, the firm looks for a set of prices that maximizes the profits on the total product mix. Various product mix strategies are as follows:
(a) Price lining Often a firm that is selling not just a single product but a line of products may price them at a number of different specific pricing points, which is called price lining. For example, a department store manager may price a line of women's dresses at $59, $79, and $99. As shown in figure PR 7, this assumes that demand is elastic at each of these price points but inelastic between these price points. In some instances all the items might be purchased for the same cost and then marked up at different percentages to achieve these price points based on color, style, and expected demand. In other instances manufacturers design products for different price points and retailers apply approximately the same mark up percentages to achieve the three or four different points offered to consumers. Sellers often feel that a limited number (such as three or four) price points is preferable to 8 or 10 different ones, which may only confuse prospective buyers.
(b) Optional - product pricing
Most firms offer optional/accessory products or features along with their main product. The pricing strategy is to keep the prices of the optional product on the higher side comparatively. For example, a car buyer may choose to order power windows, cruise control, and a radio with CD player. Pricing these options is a sticky problem. until recent years General Motor's normal pricing strategy was to advertise a stripped-down model for, say, $12,000 to pull people into showrooms and than devote most of the show room space to showing option-loaded cars at $14,000 or $15000. The economy model was stripped of so many comforts and conveniences that most buyers rejected it. More recently, however, GM has followed the example of the Japanese automakers and included in the sticker price many useful items previously sold only as options. The advertised price now often represents a well-equipped car.
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