Marketing
Textbooks
Boundless Marketing
Pricing
Specific Pricing Strategies
Marketing Textbooks Boundless Marketing Pricing Specific Pricing Strategies
Marketing Textbooks Boundless Marketing Pricing
Marketing Textbooks Boundless Marketing
Marketing Textbooks
Marketing
Concept Version 7
Created by Boundless

Product Line Pricing

Line pricing is the use of a limited number of price points for all the product offerings of a vendor.

Learning Objective

  • Describe the characteristics of line pricing


Key Points

    • Line pricing is beneficial to customers because they want and expect a wide assortment of goods, particularly shopping goods. Many small price differences for a given item can be confusing.
    • From the seller's point of view, line pricing is simpler and more efficient to use. The product and service mix can then be tailored to select price points.
    • Line pricing suffers during inflationary periods, where such a strategy can be inflexible.

Terms

  • shopping goods

    Goods that require more thought and comparison than convenience goods. Consumers compare multiple attributes such as price, style, quality, and features.

  • product line pricing

    the practice of charging different amount for goods or services that are variations on a base good or service

  • basing-point pricing

    goods shipped from a designated city are charged the same amount

  • price point

    Price points are prices at which demand for a given product is supposed to stay relatively high.


Full Text

Line pricing is the use of a limited number of prices for all the product offerings of a vendor. This is a tradition started in the old five and dime stores in which everything cost either 5 cents or 10 cents . Its underlying rationale is that these amounts are seen as suitable price points for a whole range of products by prospective customers. It has the advantage of ease of administering, but the disadvantage of inflexibility, particularly in times of inflation or unstable prices.

Traditional five and dime stores

Traditional five and dime stores followed a line pricing strategy, where all goods were either 5 cents or 10 cents. The dollar store is a modern equivalent.

Line pricing serves several purposes that benefit both buyers and sellers. Customers want and expect a wide assortment of goods, particularly shopping goods. Many small price differences for a given item can be confusing. If ties were priced at $15, $15.35, $15.75, and so on, selection would be more difficult. The customer would not be able to judge quality differences as reflected by such small increments in price. So having relatively few prices reduces this kind of confusion.

From the seller's point of view, line pricing holds several benefits:

  1. It is simpler and more efficient to use relatively fewer prices. The product and service mix can then be tailored to select price points.
  2. It can result in a smaller inventory than would otherwise be the case. It might increase stock turnover and make inventory control simpler.
  3. As costs change, the prices can remain the same, but the quality in the line can be changed. For example, you may have bought a $20 tie 15 years ago. You can buy a $20 tie today, but it is unlikely that today's $20 tie is of the same fine quality as it was in the past.
[ edit ]
Edit this content
Prev Concept
New Product Pricing
Psychological Pricing
Next Concept
Subjects
  • Accounting
  • Algebra
  • Art History
  • Biology
  • Business
  • Calculus
  • Chemistry
  • Communications
  • Economics
  • Finance
  • Management
  • Marketing
  • Microbiology
  • Physics
  • Physiology
  • Political Science
  • Psychology
  • Sociology
  • Statistics
  • U.S. History
  • World History
  • Writing

Except where noted, content and user contributions on this site are licensed under CC BY-SA 4.0 with attribution required.