Captive or Two Part Pricing: Slow Death of a Product

Captive or Two Part Pricing and Marketing

Some inventions are really smart from the beginning. Some inventions over the decades have seen major upgrades to increase business profitability.

Companies have always played the "One for all, we for you card" very well. It all starts in that boardroom where right from the Directors, The Chief Marketing Officer to the Water Boy on guard is posturing something.

It's all a class act on the papers it's all that we want to go out to the market with.

An unfair deal for the customer signed off as Fair Enough (In my mind kissing your product buhbye)

The focus of this article is to introduce you to a form of pricing that is largely used by marketing but also extremely ignored when it comes to doing much about expelling the mental anamoulous and impact it creates on the mind of the daily consumer.

In short companies that manufacturer two part products and offer services in parts are the ones we will address in this article.

A manufacturer that creates product A, that must be used along with another product +1, that is either conjoined or a smaller part of the original assembly are very intelligently using a format of pricing called "Captive Product Pricing".

Here the "Product A" is the main item and the element "+1" is part of supplies to continually enjoy the product.

Some examples are Printers and Printing Cartridges, Shaving Sticks and Razors. Companies set prices of the main product at a relatively low price and assign a steep or high price on the item's termed as supplies, hence in such scenario they become captive products as both the main product and the supplies have special specifications to match each other.

You are committed to purchasing a replacement of a printer cartridge that belongs to the same company exactly the way the company sells it, as a consumer your are left with no choice but to agree with the pricing.

A word of caution on maintaing quality and competitive pricing is always important for companies that practice captive pricing as consumers trapped into purchasing expensive supplies may end up disliking and entirely rejecting them often to never return to using them.

Service providers too have joined the race of two part pricing, after testing waters and deriving great value out of this tactful method of slipping in extras charged extra. Essentially deriving multiple opportunities to earn from the same customer by exploiting sometime his intent some times his basic needs.

An excellent example of this would be Low Cost Airlines that work on a model where additional services like extra leg space, a seat of choice and even food & beverages are sold on the aircraft out side the cost of the ticket. Cinema Halls are also good examples of this style of two part/ multiple part pricing. The additional revenue that these establishments create are primarily variable charges. Our telephone operators are not very different too there's a flat charge and then there is a charge added for every minute over and above the promised minutes.

In essence this format of pricing is highly used in consumer side marketing. A proficient marketer by today's day and age cannot separate himself from being a consumer of goods himself, to expel psychological and Anamorphic effects that this kind of captive or two part pricing special messaging campaigns should be driven and become a part of the original product strategy and messaging.

Unfortunately large product teams such as in the case of Airlines treat Ticket sales and On-board sales as two different products. Airline ticket sales being the main business and Airline food and services being the feeder businesses.

The silos in which these two elements of the same business operate is exactly where customer irritation starts.

To conclude, A sense of Bundle Pricing is essential to be triggered in the minds of the consumer to find greater value in the product as a whole. Just as you expect french fries with a burger, some coleslaw at the side - The magic of bundle pricing can find its way into a captive or two part pricing sales transaction if triggered just right.

While one must also be expeditiously cautious of any rub off effect of cheaper elements on the more costlier ones within the whole set of experience a product is out in market with this is a very common mistake marketers make when applying the bundle pricing and marketing strategy.

Food for thought? Gutten Apetit,Bonne Apetit!

Rahul Singh

Just Getting Started...