--- layout: default_v3 language: default permalink: pricing-strategies/captive-product-pricing.html i18n_link: 1102 updated: 2020-07-26 #--- article key-values ---# collection: default_topiccluster t_keyword: Captive Product Pricing tags: Captive Product Pricing, Pricing Strategies, Inventory Ordering Software type: supporting page_id: 1102 hreflang_id: 1102 parent_id: 1098 date_published: 2020-07-16 date_modified: 2020-07-26 #--- javascript schema ---# javascript_schema: - script: jquery_3_2_0_min - script: bootstrap_min - script: article_infinite_scroll - script: article_mix_infinitescroll - script: article_mix - script: article_mix_faq - script: article_mix_toc #--- section schema ---# section_schema: - section: nav-main_menu - section: article_body_v2 - section: footer - section: schedule_demo_cta #--- page key-values ---# meta_tags: t_meta_title: Captive Product Pricing- What Are the Pros and Cons? t_meta_description: Applying captive product pricing to a business model can increase traffic flow and sales while creating customer loyalty through purchase repetition. t_meta_abstract: Applying captive product pricing to a business model can increase traffic flow and sales while creating customer loyalty through purchase repetition. i_meta_image: article_body: json-ld_article: v_date_published: 2020-07-16 v_date_modified: 2020-07-26 author: p_author_id: 113 t_author: Chloe Henderson p_author_url: chloe-henderson.html i_author: 113.jpg t_author_description: Chloe received a bachelor's degree in journalism and mass communication from Ashford University and is currently a digital content creator for Hubworks. In her free time, she enjoys acting, writing, and spending time with family. p_author_facebook: //www.facebook.com/HubWorksApp p_author_twitter: https://twitter.com/HubworksApp p_author_linkedin: p_author_instagram: feature_snippet: p_type: text t_title: t_description: content: heading: t_title: Captive Product Pricing- What Are the Pros and Cons? t_description: Applying captive product pricing to a business model can increase traffic flow and sales while creating customer loyalty through purchase repetition. image: i_image: captive-product-pricing-what-are-the-pros-and-cons-1594323158-4133.png t_image_description: Captive Product Pricing v_image_attribution: Captive Product Pricing v_image_license: pexels.com v_video: paragraphs: - t_headline: t_text: Captive product pricing increases sales of several products by offering core and accessory items that require each other for full use.

Within the captive pricing strategy, core products usually require a one-time purchase of relatively low value. However, to use the core item, the product must be accompanied by high-profit accessories, which often require repetitive purchases. These accessories are termed captive products because they are necessary for the core item to function, creating a high demand for all goods involved.

For example, a customer can buy a Keurig coffee machine at a relatively low price. However, the consumer also needs to buy the pods in order to use the machine. Here, the Keurig is the core product that needs captive products to operate. While the initial purchase may have been low, in the long run, the consumer spends more due to the other necessary products.

Before implementing this pricing strategy, businesses should observe the pros and cons as well as common methods and real-life examples of captive product pricing. p_headline_type: h2 image: i_image: t_description: v_attribution: v_license: callout_text: - t_headline: Pros vs. Cons t_text: The logic behind this method is to attract customers to the lower-priced core product to generate profits from the added accessories. However, implementing captive pricing has several benefits and drawbacks, including-

Pros

Cons
p_headline_type: h2 image: i_image: pros-vs-cons-1594323158-3599.png t_description: Captive Product Pricing v_attribution: Captive Product Pricing v_license: Unsplash.com callout_text: - t_headline: Examples of Captive Product Pricing in the Real World t_text: The captive product scheme is pervasive in retail businesses because the complementary items exponentially cover the smaller profit margin from the base product. Some common examples of captive pricing include-

1. Razors
Customers may notice that even buying a razor requires multiple purchases. Retailers sell the razor handle as the main product at an initial rate. However, customers then need to purchase a razor blade or cream to complete their orders, increasing their transaction amount.

These types of captive items have short product life cycles, increasing the need to buy such accessories. While some companies offer disposable razors that can be purchased as one unit, they lack in quality. In this way, the captive product model increases the company's sales and revenue.

2. Video Games
A console is the core item when purchasing video games and is useless without the necessary accessories. Not only do the customers need to buy the games, but they also need controllers, batteries, and headsets to actually play.

Selling video games is lucrative because loyal customers are always buying new games and wanting the latest console. These types of captive products create an endless cycle of demand.

3. Printers
Some printers are offered at a relatively low rate. However, consumers can't print anything by purchasing just a printer. Captive items such as paper and extra ink are essential to using the base product. Unless the printer is damaged, the base product is usually a one-time buy, but the additional items continuously need replenishing.

4. Amusement Parks
The captive pricing method can also be applied to services. Theme parks are prime examples of additional purchases behind the main product. At an amusement park, the guests recognize that they need to buy a ticket to access rides.

However, some rides and activities can require additional costs. Then, of course, guests may need to purchase beverages and meals throughout the day. Additionally, some amusement parks have gift shops where people can purchase their photos from rides or buy souvenirs. When combined with parking and lodging expenses, the cost of attending an amusement park far exceeds the cost of a single ticket.

5. Cell Phone Companies
Most people in the U.S. today own cell phones and understand the direct cost of operating it. Still, companies lure people into buying plans by offering exclusive deals on the physical phone in exchange for the lucrative phone plan.

In this case, the cell phone is the base product, and the plan to allow calls and operations is the captive product. Cell phone companies can also offer accessories such as phone cases, headphones, or other devices that complement the phone to drive their profits. p_headline_type: h2 image: i_image: examples-of-captive-product-pricing-in-the-real-world-1594323158-2414.png t_description: Captive Product Pricing v_attribution: Captive Product Pricing v_license: Unsplash.com callout_text: - t_headline: Why Businesses May Want to Increase Their Prices t_text: Success from implementing captive product pricing relies on the items that enhance the use of the base product. Therefore, businesses can increase their profit margins by increasing the costs of captive products. Changing the prices of goods and services can be applied by-

Companies can increase their profit margins by starting their analysis internally. By using ordering software, businesses can track how much they spend on stock orders and what vendors are increasing their fees.

Replenishment systems allow management to search for stock through local supplier catalogs to find the most economical choice. Access to this information will enable companies to limit their spending on inventory purchasing and offer consumers the most attractive prices, increasing satisfaction and sales. p_headline_type: h2 image: i_image: t_description: v_attribution: v_license: callout_text: event_body: json-ld_event: t_name: Employee Scheduling for Restaurant Managers t_description: Attendees will learn how create excellent schedules. The class teaches managers how to estimate the number of employees they need to staff their locations; how to accurately forecast their customer demand; how to quickly and accuaratly write and communicate schedules to employees; and how to evaluate the accuracy and optimization of their schedules to make adjustments. v_start_date: 2022-08-08 i_image: p_location_name: Altametrics Online Webinar Course p_address: webinar.altametrics.com?site=altametrics v_price: 10.00 t_offer_description: Priority Registration v_registration_url: webinar.altametrics.com?site=altametrics ---