Posted in Marketing and Strategy Terms, Total Reads: 593
Definition: Captive Product
This is when an item is made specifically for use with another item from the same manufacturer. For example: Samsung earphones with the Samsung phone, shaving blades for a razor, software for a computer etc.
The pricing of the captive product is based on the main product setting a low mark up for the main product and a high mark up for the captive product.
Headphones are a captive product alongwith the main product the phone.
Captive products are generally used to acquire new customers who are generally inclined towards the captive product while buying the main product. For eg: a customer may be pleased to buy the hp laptop because of the free nvidia software. This can ultimately result in increased revenues for the company. Captive pricing must be done carefully because the pricing of the core product could affect the value of a captive product or vice versa.