Price Lining Definition
Price lining also goes by the name of product line pricing. It’s a process of marketing strategy where businesses and retailers set different prices of the same products but having different features, degrees, characteristics, and attributes.
In other words, it’s the process of categorizing the same product with different prices, as the attributes and features of the same product changes, their prices also changes. It is because the customers would perceive the higher value of the product if the price is higher.
For instance, companies like Pepsi and Coca-cola charge different prices of the same drink for various sizes.
The word ‘price’ in the title doesn’t mean anything; it’s a marketing concept that marketers use it in the marketing strategy. The aim of following this strategy is to increase sales by targeting a wide range of audiences.
How Price Lining Strategy Works?
Retail businesses usually adopt a price lining strategy where categorizing the product into different price ranges creates a perception in the minds of customers. First, the price range would make them to choose the product which they can afford. Secondly, higher prices would lead the customers into thinking that it would be of higher value.
Retailers and marketers advertise different versions of the same product like; basic, average and premium versions. Few choices and fewer features in the basic version, it’s also cheap and affordable to many. But as you move up to the premium version, it would offer you more features and a variety of choices.
It has turned out to be a profitable strategy because it reaches a wide audience with the help of price division.
Examples of Price Lining
Some of the most common examples of price lining that we come across and experience it in our daily lives are given below;
Apple, Samsung, OPPO, VIVO and other brands of smartphones launch new models of mobile devices of their respective brands once or twice a year. Every new model is usually upgraded from the previous model in terms of memory, speed, size, display, camera and other features.
The product would remain the same, but new features would increase the price of it, which would attract the attention of customers and they are willing to pay for it.
Automobile companies like Toyota and Honda manufacture different models of the same car every year. Every time they add some unique feature in it to make it a modified version of the previous models. Whether it is in the form of tires, body, engine, speed, comfortable seat or something else, the point is to make it a somewhat better version. So the customer would buy it.
Online teaching, study, and learning courses are a very good example of price lining. A website or the online tutor offers the introduction or first few lessons of the course for free when a potential learning student comes across the introduction of the course. If he finds it relevant and it answers all of his questions, then he’d agree to pay for the complete course.
Internet Mobile Data services
Internet service providing companies like Telenor, Etisalat and others offer internet data services, where a user can subscribe to different data internet packages. A customer has to pay for more data internet. Even though the service remains the same, but the price range varies.
Hotels and restaurants in the hospitality industry follow the price lining marketing strategy. Where they offer services like single bed, double bed, washroom, and room service, if you want these services, then the price range would change. More price for more features and services.
Consumable products like locks, razors and other products also fall in the category of price lining. For instance, single and one-time usage and disposable razor would be cheap. On the other hand, razor with replaceable blades would be costly because it has an extra feature in it.
You must have noticed one thing in all of the above examples that the product line remains the same, but the price line varies with the addition of extra features and attributes.
Advantages of Price Lining
Reach more People
When you divide the same product into different price lines, then it would attract the attention of a variety of people of different backgrounds in terms of affordability. It means that the product with the price line would reach a wider audience.
Choices for Customers
Many types of customers visit the market; some are price-conscious, and the others are quality conscious and value-conscious. Price-conscious customers rank products based on their affordability, quality-conscious customers would prefer the products with higher quality. Value conscious customers would choose the product at higher prices because they think that the product would be good if its price is higher.
Therefore, price lining provides customers more choices to choose from based on product features, price, quality, and higher value.
Less Inventory Cost
Retailers are familiar with the choices of people and which product is in more demand. It is price lining that helps them to analyze the market and customers’ preferences. Anyways, you can order the products that are in demand after your market analysis. Instead of blindly ordering for the stock and keeping it in the inventory. Therefore, price lining helps you to minimize the inventory cost.
Price lining divides the product into various packages and offers multiple features and prices. Now, an unknown customer who hasn’t used the product before can start with the lowest price package. If he likes it, then he would go for the premium features. Otherwise, he won’t buy it. However, it provides the customers with an opportunity to test the product without paying a heavy price for it.
Profit Margin Remains Unchanged
Most importantly, when a retail company or a business follows this pricing strategy, then the profit margin of the company remains unchanged. Profit margin increases because the product reaches more audiences and more people would buy it.
Disadvantages of Price Lining
Sensitive to Market Trends
When the economy of a country is in recession, then it would result in higher unemployment. Therefore, people would have less extra money to spend, and they would prefer products with lower prices. If a company is following a price lining strategy, then cheap products would be sold and high priced products with more features would remain unsold. The point is that the price lining strategy is sensitive to market changes.
When it comes to the implementation of a price lining strategy, the marketers have to be very careful with the features they’re providing. If the features you’re offering don’t match with the price, then people won’t buy it. It’s because people want a value in the product that they are buying if the product doesn’t add any value. Then they won’t pay extra money for something that doesn’t add any extra value to it.
Sometimes, customers would feel being discriminated against when the company charges high prices from them. It’s because they think that why other customers are paying less price for the same product, and we have to pay more. Therefore, it results in the form of customers leaving the brand.
One thing has become clear in our discussion that price lining brings a lot of benefits for the company if the company implements it properly. If the marketers avoid the economic trends and customers’ purchasing power, then it would fail.
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