Optional-product Pricing - Definition, Importance & Example
What is Optional-product Pricing?
Optional product Pricing is a pricing method through which the company earns more through cross-selling products along with a basic core product. Under optional product pricing, the basic core product is priced low, which can be enhanced through additional / optional products which are sold at premium by the same company. These optional products can be enhancements, accessories, upgrades etc.
Importance of Optional Product Pricing
The main objective of a product is to fulfil a customer need. The benefit of any core product is to provide benefit to the customer which is useful in fulfilling their basic need. However, some companies provide additional value added accessories or optional products which enhance the product usage and experience. Optional product pricing helps the company earn additional revenue by cross selling other related value added products.
Difference Between Optional Product & Captive Product
Every product is made to offer a core benefit. However, there are several accessories or products which are useful while using the core product. Optional products are those which do not disturb or stop the main functionality of a product. On the other hand, captive product is an accessory which is essential for the core product to function. For e.g. if a camera is a core product, a camera bag is an optional product & a film roll or memory card to save images is a captive product.
Examples of Optional Product Pricing
There are several examples of optional product pricing which can be understood as below:
1. It is widely used in the printer industry where the cost of the basic product is comparatively less but the cost of accessories such as color cartridges is higher.
2. Cars provide optional premium upgrades like leather decors, sun roof, music systems etc. These are additional features and charged as optional product pricing.
3. Airlines provide air travel at basic airfare as the core benefit. However, other optional services like premium seats, preferred meals, more luggage etc. are charged at a higher premium.
Hence, this concludes the definition of Optional-product Pricing along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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