It also allows them to attract new customers. A second package containing a full regiment of text-editing features—word count, formatting and publishing tools, plus the original spell-checker. In our example, Raymond’s management determines all the components of product cost viz. Pure SaaS businesses can benefit hugely from a well-tuned product line approach, but, as we’ll see, it’s a good strategy for all kinds of businesses. Here we can see how... Hospitality. We might see its product line play out like so: A very simple spell-checker feature packaged by itself. Join the 18,000 companies following the next release. Three Tier Pricing Examples:. But entrepreneurs who sell a commodity-like service or product, for example warehousing or plain white t-shirts, are more likely to compete on low costs and low prices. The common types of marketing automation. A reasonably big list of marketing strategies. At the end of the day, there is only one rule in pricing strategy—price intelligently.But there’s more than one way to play it. The packaging of features and sales model also influence a product’s growth and profitability. While product line pricing has considerable appeal, it’s not a total world-beater. Perhaps an even more obvious example of effective product line pricing: phones. The 6 most common examples of optional product pricing. Get access to all the content Recur Studios has to offer, delivered straight to your inbox. They have an intimate understanding of the value of each of its product features, represented by a dot on the matrix. The best option for you will differ based on your company’s position in the market and the nature of your product. Product line pricing is an excellent strategy for all kinds of companies for all those reasons mentioned; informing customers of quality differentials is vital to cultivating the perception of your brand and to snaring the biggest share of the market possible.If we’ve done our job, and you’re just chomping at the bit to know even more about pricing strategy, then click this link to find your way to ProfitWell’s ebook “The Anatomy of SaaS Pricing Strategy.”. Now we come to the motherlode: how you actually go about choosing one of the various product line pricing strategies available. Here’s a question that stumps too many young SaaS companies: what’s your pricing strategy? Setting your price based on the perceived value of your products and service in the minds of your customers as opposed to factors such as your costs. A product line with low-end, mid-range, and high-end pricing means you’re likely to pull in an array of customers with various needs who’ll be catered to by different cost categories. Examples of product line pricing Retail. Clothing is a great example: an outlet is likely to have product lines based on the material and tailoring quality of different items of clothing.Let’s look at ASOS’ online store for an example. Think of the way in which Toyota offers a durable, low-priced alternative to their high-end Lexus model. Here, your lower-price offering is a free subscription. Wherever quality is a variable, product line pricing can be effective. We can see here that one product line comprises leather boots, faux leather boots, and canvas boots from the same collection. All Rights Reserved. Overpricing leads customers to look for substitutes -> less demand -> Losses. Optional product pricing is a very common type of pricing strategy and is used in many different industries. Visit our, Copyright 2002-2020 Simplicable. An overview of the basic types of socialism. You might also hear product line pricing referred to as price lining, but they refer to the same practice.The goal of product line pricing is to maximize profits by positioning new products with the highest number of features or with the most cutting-edge individual features at the highest price point. Deciding to go with a Software-as-a-Service (SaaS) pricing model is no longer particularly revolutionary. "Captive product pricing (often referred to as captive pricing) is a great way for businesses to sell complementary goods in order to maximize revenue. Examples of bundle pricing. This is where you show the customer THREE pricing options. Because only a few people can afford them, expensive products create the illusion of exclusivity, status and quality. All good automobile manufacturers, like the aforementioned Toyota with their Toyota/Lexus product line, are acutely aware of the fact that, while cars are hugely useful, buying power ranges widely among consumers. The lower-value, lower WTP feature is there to sweeten the deal. Captive pricing involves your company taking advantage of a product that will be used primarily to attract a large volume of customers. Founder & CEO of ProfitWell, the software for helping subscription companies with their monetization and retention strategies, as well as providing free turnkey subscription financial metrics for over 20,000 companies.

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