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Price Bracketing

Disciplines > Marketing > Pricing > Price Bracketing

Description | Example | Discussion | See also

Description

Sell several products at a set of price points.

The classic bracket is three products, with the main product in the middle, a stripped-down version below it and an enhance version above it.

Ensure each product has a target market sub-segment (or a very deliberate comparative purpose). They may well be a part of a product family, in which case they should be clearly differentiated from one another. They may in fact be very similar, for example being basically the same product but with differing levels of functionality.

Example

A web software company has 'entry', 'developer' and 'pro' versions, each with increasing features and higher pricing.

A camera manufacturer has a range of similar DSLR products, from a 'first SLR' to professional models.

Discussion

Price bracketing allows you to have a low-cost option to hook people into your brand, from which you can later up-sell them to a more full-featured product. When you are selling directly, you can also up-sell from the basic model on the showroom floor. This can make having a lower-priced item that sells very few units worth having. In particular if a higher-priced item seems to give rather more value for the price, this is likely to sell more. This is because people often compare on value ('bangs per buck') as much as just price (which they only really do if they are very price sensitive).

For people who are not at all price-sensitive and who always want the very best at whatever price, a 'super premium' option that is significantly more expensive may still be chosen. They only time they will balk is if they feel the seller is trying to take advantage of them.

This also gives customers options, which many like better than the 'take it or leave it' principle when you only have one product. Even if only one item is sold, having a nominal range gives the customer a sense of control in their ability to choose.

Price bracketing enables you to compete in different parts of the same overall market (low price, mid price and so on). When you have the whole market covered, if you do this well you can perhaps even 'own the market', or at least dominate and push out (or hold out) other companies.

Price bracketing is common in the software industry, where it is easy to add and remove features with little cost of doing so. It is also common in fragmented large markets, where there are enough customers in each sub-segment to make it worthwhile.

See also

Premium Pricing, Loss-leader Pricing