What Is a Product Line Pricing Strategy?

by Victoria Bailey - Updated September 27, 2018
Tunnel Car Wash Machine

Companies with multiple product lines often use a product line pricing strategy to create an impression of value toward certain goods. This technique is designed to create cost categories that separate goods into different levels of perceived value. Creating large price gaps between the levels is most effective since it makes it easier for consumers to tell the difference of quality details among products. There are a variety of different product line pricing strategies; the correct one for your goods depends on what you offer to consumers.

What Product Line Strategy Is Best?

Product line pricing can use a number of different strategies. Successful plans tie into a company's entire product line and take each item into account when looking to profit on the entire line.

One popular type of product line pricing is a product mix pricing strategy. This concept uses the entire product line as a whole while selling each product individually. One product mix price lining example would be with a company that sells razors. A company with this product would be smart to offer razors at a discounted price, often for free or as a loss leader, while the replacement cartridges are priced much higher. The customers then become the company's captive audience, buying the replacement cartridges at the higher price. This pricing concept looks at the entire future package price of both the razor and the replacement cartridges when deciding on a cost for the individual parts.

Prestige pricing, also known as image pricing, aims to attract consumers looking for products with a high perceived value. Pricing these items at a discount can actually hurt sales. By raising the price to one higher than normal, companies can garner more profit from both an increased bottom line and an increased number of customers. Examples of these types of products include high-end jewelry, automobiles, fashion, perfumes and other goods that are attractive to those with higher incomes.

Strategies for Larger Product Lines

Companies with very large product lines often look to increase the aggregate sales of items rather than concentrating on one particular item or set of items. These companies often use a technique known as leader pricing. One of the best examples of this is grocery stores that price match with other grocery advertisements in their neighborhoods. Even if they lose money by selling the advertised item at a lower price, they'll still make a profit by selling a cart full of other products to the consumer while he's there.

Video of the Day

Brought to you by Techwalla
Brought to you by Techwalla

Other Types of Product Line Pricing Strategies

Other pricing strategies work well only for certain types of goods or services, but they can be solid plans if used correctly. Bundled pricing is familiar to anyone who has dealt with cable, internet or insurance companies. With these types of providers, one product may have a standard price, but if a consumer agrees to buy multiple products, then the price may be lowered to half or less for each one.

Price lining is a popular concept for a certain type of store today. With this strategy, retailers offer a wide range of products, all for an identical price. Dollar stores use this technique very successfully. While individual products may have different values, the identical prices for all goods make it easier for consumers to want to make multiple purchases at one time.

About the Author

Victoria Bailey has owned and operated businesses for 25 years, including an award-winning gourmet restaurant and a rare bookstore. She spent time as a corporate training manager in the third-largest restaurant chain in its niche, but her first love will always be the small and independent businesses. Bailey has written for USAToday, Coldwell Banker, and various restaurant magazines, and is the ghost writer for a nationally-known food safety training guru.

Photo Credits

  • siur/iStock/Getty Images
Cite this Article A tool to create a citation to reference this article Cite this Article