Product Mix Pricing Strategies

How Businesses Price Multiple Products for Maximum Profit

In today’s competitive markets, companies rarely sell just one product. Instead, they offer a range of related products, each designed to meet different customer needs. Pricing such products individually may seem simple, but in reality, it can lead to missed opportunities or reduced profits. This is where Product Mix Pricing Strategies play a crucial role.

Product mix pricing helps firms decide how to price a group of related products together so that the overall profitability of the business is maximized rather than focusing on a single product.

What is Product Mix Pricing?

Product mix pricing refers to the strategy of pricing multiple related products in a coordinated manner to achieve overall business objectives. Since these products are connected through demand, usage, or production, the price of one product often affects the sales of others.

This strategy is widely used in industries such as automobiles, electronics, FMCG, hospitality, and services, where customers usually purchase products in combinations rather than individually.

Types of Product Mix Pricing Strategies

When a company offers several related products, it must carefully decide how each product should be priced in relation to others. Product mix pricing strategies help firms manage customer choice, maximize revenue, and remain competitive. The major types are explained below in detail:

1. Product Line Pricing

Product line pricing refers to the practice of setting different prices for products within the same product line based on differences in features, quality, size, performance, or benefits offered. The firm does not price each product independently; instead, it creates a logical price progression within the line.

The main objective is to offer customers multiple options and encourage them to move towards higher-priced versions by highlighting additional value. The price gaps between products are carefully planned so that customers clearly perceive the differences.

Example:

Maruti Suzuki offers a range of cars with varying features and price levels, allowing customers to choose according to their budget while motivating them to upgrade to higher variants.

2. Optional-Product Pricing

Optional-product pricing involves pricing the main product at a basic or competitive price while charging separately for additional features, services, or accessories. These optional products enhance the usefulness, convenience, or performance of the main product.

This strategy allows firms to keep the entry price attractive while increasing overall revenue through add-ons. Customers pay only for what they want, making the pricing flexible and customer-oriented.

Example:

When buying a laptop, customers may have to pay extra for additional storage, premium software, extended warranty, or accessories like a mouse and bag.

3. Captive-Product Pricing

Captive-product pricing is used when certain products are essential for using the main product. In this strategy, the main product is priced low to attract customers, while the related consumable or replacement products are priced higher.

Once customers purchase the main product, they become dependent on the captive products, leading to repeat purchases and continuous revenue for the firm. This strategy is common in products with ongoing usage requirements.

Example:

Printers are sold at low prices, but ink cartridges are expensive. Similarly, razors are cheap, but blades need frequent replacement at higher prices.

4. By-Product Pricing

By-product pricing refers to pricing and selling secondary products or waste materials generated during the production process. Instead of treating them as waste, firms sell by-products to reduce disposal costs and improve overall profitability.

This strategy helps companies recover part of their production costs and supports sustainability by reducing waste.

Example:

In the sugar industry, molasses is a by-product of sugar production. It is sold to distilleries and chemical industries, generating additional income.

5. Bundle Pricing

Bundle pricing involves offering two or more products together at a combined price that is lower than the total of individual prices. This strategy encourages customers to purchase multiple products at once and increases sales volume.

Bundles also simplify decision-making for customers and increase perceived value, making the offer more attractive.

Example:

Fast-food chains like McDonald’s offer combo meals that include a burger, fries, and a drink at a discounted price.

Why Do Firms Adopt Product Mix Pricing Strategies?

Companies use product mix pricing to:

• Maximize overall profitability

• Encourage customers to buy more products

• Manage price sensitivity and competition

• Improve customer value perception

• Optimize the performance of their entire product portfolio

Rather than focusing on individual product profits, firms look at how products support and complement each other.

Conclusion

Product mix pricing strategies highlight the fact that pricing is not merely about assigning a price tag to a product—it is about strategic decision-making. By intelligently pricing product lines, add-ons, consumables, by-products, and bundles, companies can balance customer satisfaction with long-term profitability. For management students, understanding product mix pricing provides a real-world perspective on how businesses design pricing structures that influence buying behavior and drive sustainable growth. In a market where choices are many and competition is intense, smart pricing across the product mix often becomes the key to business success.