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Pricing

Captive Pricing

The term captive product pricing refers to the price of goods that consist of a primary item as well as various secondary or add-on products that are required to get full value out of the main product. This means that the price of the add-ons is effectively "captive" to the price of the main product.

There are various reasons why companies might choose to use captive product pricing. In some cases, it may be used as a way to increase the perceived value of the primary product.

In other cases, it may be used as a way to discourage customers from substituting cheaper alternatives for the add-on products. For example, if a customer bought a printer but then bought cheaper ink cartridges from another company, the printer manufacturer would not make as much money.

Captive product pricing can also be used as a way to bundle products together that are complementary to each other. For example, a company might sell a computer and include a free printer. In this case, the company is using captive product pricing to increase the chances that the customer will buy both products.

There are a few risks that come with using captive product pricing. First, it can alienate customers who feel like they are being forced to pay for something they don't want or need. Second, it can encourage customers to find ways to get around the pricing strategy, such as buying the add-on products from another company. Finally, it can lead to regulatory scrutiny if the pricing strategy is seen as anti-competitive.

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