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What is Product Line Pricing?

Product line pricing is a pricing strategy in which companies base the price on the cost to produce the product and what competitors are charging for similar products. It's used when products within the same product range have different features or qualities.

Understanding Product Line Pricing Strategy

Product line pricing is a pricing strategy used by businesses where the range of similar products are priced differently due to varying levels of quality and features. It is used as a pricing technique to increase market demand for various items within the same product line. Product line pricing is the practice of offering a variety of product models at different price points, allowing customers to choose their preferred product based on their needs and budget.

The goal of product line pricing is to maximize the business’s profits by creating different tiers of quality of products, to cater to different segments of the target market. The pricing structure should be set for different levels of product quality – from high-end to entry-level, to meet customer needs while maximizing profit margins. This technique is most commonly used in electronic and appliance stores, where the product quality and features vary between cheaper and more expensive versions.

How to Implement a Product Line Pricing Strategy

The key to implementing a successful product line pricing strategy is to have a clear understanding of the different customer segments and the features and qualities of each product line. Businesses must carefully determine the price points for their product lines. This includes considering the cost involved in production and the expected market demand and perceived value.

Once the strategy is formulated, businesses must also create a system for tracking and monitoring customer demand and activity associated with each product line item. This will help them evaluate the success of their strategy and determine whether they need to adjust the price points or adjust the features associated with each product.

Case Studies on Effective Product Line Pricing

Apple and Samsung are two of the most successful companies that have implemented product line pricing strategies to great success. In its product line pricing strategy, Apple does an excellent job of categorizing its products into different segments and setting different price points accordingly. Samsung takes product line pricing a step further, by releasing multiple iterations of the same phone throughout the year, with each having a slightly different price point to suit different customer segments.

Taco Bell is another great example of product line pricing, as it uses different variations of its menu items to appeal to different segments of customers. Its menu offerings are classified into four pricing tiers – “Value Menu”, “Cantina Bell”, “Cantina Power Menu”, and the top-tier “Taco Bell Fresco Menu” – to cater to different budget brackets.

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