Sometimes things we buy can be supplemented with an additional purchase, such as a case for a laptop or onboard upgrades. Although we may feel we really need to purchase the extra item, it usually improves our experience.
When we purchase these optional items, they are typically priced using a strategy called optional product pricing. This model is suitable for all different types and sizes of businesses, from electronics retailers to car manufacturers to software companies.
The point of this strategy is that if there are products that seem to be better when buying another, customers are more likely to buy the second product and make more sales – which is exactly what businesses want. Read on to learn more about optional product pricing, examples from companies you may be familiar with, and outlining considerations for using the strategy.
What is the pricing of the optional product?
Optional product is priced when the company selects a core product at a lower cost and additional optional products at a higher price to offset any losses. Optional products are not required for the core product to function, but they usually enhance the customer experience.
As mentioned above, the two main components of optional product pricing are:
- Core product: The main withdrawal of the customer or the reason for making the purchase. It meets customer needs and does not require optional product operation. Core products are sometimes referred to as loss leaders.
- Complementary product(s): He will likely buy a product he bought the base product from to enhance his experience with the base product, such as additional additional software features or adding GPS or satellite radio when buying a car.
This pricing strategy should not be confused with captive product pricing, as both are based on similar concepts.
Optional Product Pricing vs. Restricted Product Pricing
Pricing the discretionary and captive product may seem like the same pricing strategy, but the primary difference lies in the second product that the consumer will buy. Previously, the add-on product is optional and only complements the base product. On the other hand, with captive product pricing, the additional product is required to make the primary product work, so customers have to buy it, hence the word captive.
So, for example, ink is required for the printer to work (printer ink is a restricted product), but the camera case is not required for the camera to work (the camera case is an optional product).
Let’s review some real-world examples of optional product pricing from companies you may be familiar with.
Optional Product Pricing Example
Casetify sells phone cases for Android and iOS phones. It uses an optional product pricing model for its products, where phone cases are the primary product, and things like screen protectors or phone straps are optional products offered to customers at the checkout window (as pictured below).
Consumers do not need to purchase anything but a phone case, but the optional product can enhance their experience.
JetBlue is a US airline that uses an optional product pricing model. It sells airline tickets as a base product and additional options such as extra bags, better seats or food and drinks on board to complement the flight experience.
The image below is an example of the additional costs of adding a second bag to a JetBlue flight.
Optional Product Pricing Disadvantages
The main disadvantage of optional product pricing is that enough customers must purchase your optional products to offset any losses caused by pricing your base product. If you overestimate consumer interest or if optional products don’t truly complement their experience, you will end up losing revenue.
Another disadvantage of optional product pricing lies in consumer confusion. If it’s not clear that your optional products are really optional to try, customers may get frustrated with higher-than-expected costs and take their business elsewhere.
The choice to use the strategy should depend entirely on the needs of your business. But, if you have a core product that can be improved upon or really supplemented with additional products to sell, it is worth considering as it is a valuable revenue generation tool.