Wednesday, February 24, 2010

Product Line and Product Bundle Pricing

In today’s highly competitive business world, companies have to rely on multiple pricing strategies to conduct business. According to Armstrong and Kotler, product line pricing is a type of a pricing strategy that a company uses when it develops a line of products in the same family, rather than just one product (Kotler 271). Different products within a product line are priced differently. It is important that when using the product line pricing that a company establishes defined price steps between the different products to justify the difference in prices. For instance, a company has to convince or show to consumers that a more expensive product in its product line has more value than a product that is cheaper. Another type of a pricing strategy is product bundle pricing. Product bundling pricing involves a company combining several of its products and offering them together as a bundle at a reduced price (Kotler 274). A good example of a company that implements both of these pricing strategies is Microsoft Corporation. Microsoft has developed a program line that starts with the basic programs such as OneNote for $79.95 and ends with Outlook with Business Contact Management for $679.95 (www.microsoftstore.com). To promote the sales of its product or introduce customers to some of its new products that consumers otherwise would not buy separately or wouldn’t try at all because they are too expensive, Microsoft bundles up those programs with a more popular programs that everyone needs and sells them together at a reduced price. For instance, Microsoft’s Office Home and Student Suite includes Word, Excel, PowerPoint, and OneNote programs for $149.95. If someone were to buy all four of these programs they would spend $409.8 (OneNote 79.95+ 109.95Word + 109.95 Excel + 109.95PowerPoint).

Olga Fedorovskaya

MKTG 301 E

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