Pricing: Product Line Pricing 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 and the product life cycle within the mix. 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 strategy you should 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 models. Each of those model levels has its own price point. Automotive manufacturers have economy models, environmental models, luxury models, work models, and more.

Product Line Pricing

• What it is: Pricing a number of products 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.

  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.

Pricing for products in a mix or line requires a more complicated pricing structure than pricing for a single, stand alone product.

Ensure that you consider pricing 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.

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