Product Mix Pricing — Transcript

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1. 0:03in this video we're going to take a look
2. 0:04at product mix pricing considerations
3. 0:08so going back to our main pricing
4. 0:10diagram here which shows all of these
5. 0:12different strategies and considerations
6. 0:14this video focuses on product mix
7. 0:17pricing considerations which include
8. 0:19product line pricing optional product
9. 0:22pricing
10. 0:23captive product pricing by product
11. 0:25pricing and finally product bundle
12. 0:28pricing
13. 0:29let's look at each of these briefly
14. 0:33so product line pricing means that we're
15. 0:35setting price steps between various
16. 0:37products in a line based on either cost
17. 0:39differences
18. 0:40customer evaluations of features or
19. 0:43competitors prices
20. 0:45if you recall from our discussion on
21. 0:47product mixes companies often offer a
22. 0:50wide range of products within their
23. 0:53product mix to serve different customers
24. 0:56so things like cars and electronic
25. 0:58devices there's going to be many
26. 1:00different options within a company's
27. 1:02product mix with these particular
28. 1:04products with product mix pricing or
29. 1:07product line pricing
30. 1:08we are going to set our differences in
31. 1:10pricing based on what this product mix
32. 1:13looks like
33. 1:14for example here's a company that sells
34. 1:18internet service and you can see their
35. 1:20their best
36. 1:22option is at 50 a month their worst
37. 1:24option is at 30 a month and then they've
38. 1:27got a few options in between
39. 1:30those pricing decisions aren't made
40. 1:32necessarily on cost or on the value from
41. 1:36the customer what they might be doing
42. 1:38here is looking at the various
43. 1:40options that they provide in their
44. 1:42product line and then setting those
45. 1:45prices accordingly
46. 1:47we also often see product line pricing
47. 1:50when new
48. 1:51products in a product line are released
49. 1:53so here we have an example of the pixel
50. 1:56smartphone when the pixel 3 came out
51. 1:59you can see that price of 799
52. 2:02the pixel 2 then becomes a little bit
53. 2:04less desirable that price drops a little
54. 2:08bit and
55. 2:09the original pixel so on and so forth we
56. 2:12can see the the pricing strategy that
57. 2:14goes into uh in this case google's
58. 2:17smartphone product
59. 2:20mix next up is optional product pricing
60. 2:24and this occurs when we uh price
61. 2:28products that are optional to the
62. 2:29customer or accessory
63. 2:32accessories sold with the main product
64. 2:36so
65. 2:37in this example here what we have is
66. 2:39optional products on flights the main
67. 2:41product that the perch the customer has
68. 2:43purchased is the flight from point a to
69. 2:46point b
70. 2:48within that main product there's going
71. 2:49to be accessory products or optional
72. 2:52products
73. 2:53things like these snacks or maybe
74. 2:55purchasing earphones or
75. 2:58checking luggage things like that
76. 3:00whenever the
77. 3:03offering is optional to the customer
78. 3:05meaning they don't have to
79. 3:07purchase it to enjoy the main product we
80. 3:09refer to that as optional product
81. 3:12pricing
82. 3:14a similar concept to optional product
83. 3:16pricing is captive product pricing and
84. 3:19this is when we price products that must
85. 3:21be used with the main product
86. 3:25for example
87. 3:27when you buy a razor you're eventually
88. 3:30going to need to buy new blades for that
89. 3:32razor the razor may be the main product
90. 3:35but the blades are the the captive
91. 3:37nature of that where
92. 3:39you must purchase those to operate the
93. 3:41razor
94. 3:42similar concept holds for video games
95. 3:44and consoles ink cartridges and printers
96. 3:47or
97. 3:48ebooks for
98. 3:50let's say a kindle
99. 3:52so what we see here is often captive
100. 3:55products are sold at cost so
101. 3:58sold very low price
102. 4:00uh
103. 4:01in order to attract customers in because
104. 4:03marketers know that once they've
105. 4:05purchased that product um
106. 4:07they're going to need to con consume
107. 4:09these
108. 4:10these other products that must be
109. 4:12purchased
110. 4:13and this we often see as a a criticism
111. 4:16of marketing or
112. 4:18something that where customers are
113. 4:19unhappy because
114. 4:21of this captive nature of this
115. 4:24this system
116. 4:26so here's a picture of something that
117. 4:28i'm sure many of you might be familiar
118. 4:30with you purchase a printer this is the
119. 4:33main product right in this case we see a
120. 4:35quite a low price for this printer this
121. 4:37is a 30 printer
122. 4:39but then again to operate the printer we
123. 4:41need to purchase these these uh ink
124. 4:43cartridges which are
125. 4:45higher than the price of the main
126. 4:47product itself the key thing here is
127. 4:49these are not optional in order to
128. 4:51operate our main product in this case
129. 4:53the printer we need to purchase these
130. 4:56additional products this is what sets it
131. 4:58apart from optional product pricing
132. 5:03next up is by product pricing and this
133. 5:06is a special pricing consideration where
134. 5:08we attempt to turn trash into cash
135. 5:12we're pricing buy products here to make
136. 5:14main products price more attractive
137. 5:17so any time that a marketer sees an
138. 5:19opportunity where there is a waste
139. 5:21product that they
140. 5:23has been created based on creating the
141. 5:25main product and we can turn that waste
142. 5:27product into something profitable this
143. 5:29would be an example of byproduct pricing
144. 5:32for example sawmill wood chips get
145. 5:35turned into paper sawmill wood chips are
146. 5:37not
147. 5:38the main product but
148. 5:40they're considered waste actually for
149. 5:42many uh sawmills but if you can turn
150. 5:44that into paper
151. 5:46that's byproduct pricing
152. 5:48food scraps into compost is another
153. 5:50example
154. 5:52cheese brine this is something that's
155. 5:53done in wisconsin
156. 5:55famous for making lots of cheese they
157. 5:57use cheese brine which is a salty liquid
158. 6:00substance
159. 6:01they then turn that into road salts for
160. 6:04their cold winter months to help
161. 6:07with
162. 6:08safe driving conditions
163. 6:11zoos selling manure to farmers again all
164. 6:14of these are examples of turning
165. 6:16otherwise
166. 6:17garbage
167. 6:18into into cash hopefully
168. 6:25okay next up we have product bundle
169. 6:27pricing so in this sense we are
170. 6:29combining several products and offering
171. 6:31a
172. 6:32discounted bundle at a at a lower price
173. 6:35so we've all seen these different
174. 6:37options for a variety of different
175. 6:40products and services in this case uh
176. 6:42bundling your cable your internet and
177. 6:44your phone is going to give you a lower
178. 6:47price than if you were to do each of
179. 6:49these
180. 6:50individually
181. 6:52fast food makes use of bundle pricing
182. 6:54often uh here's an example where french
183. 6:57fries a hamburger and a drink can be
184. 7:00purchased individually
185. 7:01however
186. 7:03mcdonald's has given us the convenience
187. 7:04of of purchasing those all together for
188. 7:07a cheaper price
189. 7:09that would be a good example
190. 7:11of product bundle pricing
191. 7:13so again in this video we took a quick
192. 7:15look at various product mix pricing
193. 7:18considerations this occurs when
194. 7:21companies look to set prices based on
195. 7:23their product mix