Page 381 - Foundations of Marketing

348 Part 4 | Product and Price Decisions

Captive Pricing
Companies that produce and
market razors engage in captive
pricing by charging high
prices for replacement blade
cartridges. To continue using
a specific razor, the customer
must purchase additional
blade cartridges.

© Aleksan/ Shutterstock.com

Premium Pricing

Premium pricing occurs when the highest-quality product or the most-versatile and most
desirable version of a product in a product line is assigned the highest price. Other products in
the line are priced to appeal to price-sensitive shoppers or to those who seek product-specific
features. Marketers that use premium pricing often realize a significant portion of their profits
from premium-priced products. Examples of product categories in which premium pricing is
common are small kitchen appliances, beer, ice cream, and television cable service.

Price Lining

Price lining is the strategy of selling goods only at certain predetermined prices that reflect
explicit price breaks. For example, a shop may sell men’s ties only at $ 22 and $ 37 . This strat-
egy is used widely in clothing and accessory stores. It eliminates minor price differences from
the buying decision—both for customers and for managers who buy merchandise to sell in
these stores.

Promotional Pricing

Price, as an ingredient in the marketing mix, often is coordinated with promotion. The two vari-
premium pricing Pricing ables sometimes are so interrelated that the pricing policy is promotion-oriented. Examples of
the highest-quality or most- promotional pricing include price leaders, special-event pricing, and comparison discounting.
versatile products higher than
other models in the product line Price Leaders
price lining The strategy of
selling goods only at certain Sometimes a firm prices a few products below the usual markup, near cost, or even below cost,
predetermined prices that which results in what is known as price leaders . This type of pricing is used most often in
reflect definite price breaks supermarkets and restaurants to attract customers by offering especially low prices on a few
price leaders Products priced items, with the expectation that they will purchase other items as well. Management expects
below the usual markup, near that sales of regularly priced products will more than offset the reduced revenues from the
cost, or below cost price leaders.

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