Product line pricing is a product pricing strategy to be used when you have more than one product in a line. Pricing techniques need to be balanced with demand elasticity and with your marketing mix product positioning strategy.
Product line pricing requires a different look at setting price. With a line of products to price, you need to consider the whole product mix, the product life cycle within the mix, and your product positioning strategy.
Often new products will enter and exit a line. How dependent is the entire line on one or more products?
Do buyers need all products in the line or can individual products still serve a need? Ask yourself these questions (and more) when deciding which pricing method or product pricing strategy you need to use.
Within the product mix or line, there are typically price points that reflect the price level: high, medium or low.
For example, most computer manufacturers have basic models, business models and premium high graphic and/or gaming models. Each of those model levels has its own price point. Automotive manufacturers have economy models, environmental models, luxury models, work models, and more.
You need to ensure that you clearly understand where you want, and need, to position your product and/or service; it's important to know when you are building your price.
What it is: A product pricing strategy for a number of products (more than one) within one product line.
For example, you may charge a base price for a basic model, the next product up might have more features or be a better quality - it would be a higher price, and so on throughout the line (think of beds and the number of coils, or the type of cover, etc. or think of televisions with size and the number of pixels as a differentiation in the product line).
Why and When to use it: Use this strategy only if you have more than two products in the line and if you have clear enough differentiation of features and benefits - if the customer cannot distinguish between the products, this strategy will fail.
Additionally, understand your product positioning strategy: is your product line targeted for commodity or luxury markets (the line needs to by targeted to the same, or linked, markets).
Use this strategy through the growth, maturity and declining stages of the product's life-cycle; if used in the introduction phase, there might not be enough early recognized value between the products in the product line.
With this particular pricing strategy, it is important to build strong product differentiation within the line so that buyers can understand what they're paying for and why.
Pricing for products in a mix or line requires a more complicated product pricing strategy and structure than pricing for a single, stand alone product.
Ensure that you consider pricing techniques and levels or price points, phases of the product life cycle (for all products), the geographic market for the line, the costs and whether or not there are any economies of scale in producing the line (or some of the products in the line) versus individual products. Also ensure that you clearly understand your competitive strategy alternatives (to cutting price) and how pricing fits into your overall business strategy and small business plan.
Return from Product Line Pricing to Pricing Strategy for a number of other pricing techniques to review.
For more on pricing policies, consider other Pricing Strategies.
Or return to More for Small Business Home Page.
Pricing is the foundation of your business success.
Interestingly many businesses focus on either building their price structure by using costs as the basis OR by using market information (that is, what the market will pay).
The reality is that the price needs to be constructed with both costs and market forces as part of the consideration. Additionally, the product or service value (ranging from commodity to luxury) plays a role in price strategy.
Building a strong pricing program is part of your marketing mix activities (product or service; promotion; place or location; and price). Many businesses focus most of the marketing attention on developing the product or service program and then promoting it; make sure you give price the time and attention it needs.
Businesses need to be more aware of the power of competitive and comparative markets than ever before.
Because technology and the internet makes pricing information available 24 hours a day, 7 days a week.
Customers use their mobile phones, laptops and even desktops to price check and compare.
The speed of pricing changes makes this an urgent action item for all businesses.