Captive Pricing
Concept summarized by Sam Mishra, President, FranteractiveAlso known as Two-Part
Pricing. Here, the goal is to make the customer captive to the second complementary part, by providing the first part at an attractive price / for free. Cell-phone service providers use
this pricing model by providing cell phones for free, which are tied to a one-year / two-year service contract. Another example is that of affordable ink-jet
printers and expensive ink cartridges from the same manufacturer: e.g., Cannon
ink-jet cartridges work only with Cannon ink-jet printers and HP ink-jet
cartridges work only with HP ink-jet printers. The printer manufacturers rake in huge profits by selling the printer once and selling the expensive ink cartridges again and again to the customers held captive by the investment in the printer.
If you can think of other captive pricing examples in your
daily life, please email us at info@franteractive.net. If we add your example to the list, you will earn 20 strategy points. Once you accumulate 1000 strategy points, you will be eligible to receive a free copy of Strategic Case Analysis by Sam Mishra.
Also see Penetration Pricing, Perceived Value Pricing, Product Line Pricing, Skimming Pricing, and Target Pricing Pricing.