What is captive product pricing?

Captive product pricing is a type of pricing strategy where the price of a main product is set low or at cost to attract customers to purchase the main product, while generating profits through the sale of related or complementary products. These complementary products are known as captive products as they are sold alongside the main product.

Captive product pricing can help to increase overall sales and revenue by encouraging customers to purchase complementary products that they may not have considered buying otherwise. It can also create customer loyalty by offering a wider range of products and services, and increasing the perceived value of the initial purchase.

Examples of captive product pricing include printers which are sold at low or cost prices, with the related high-priced ink cartridges acting as the captive products. Similarly, game consoles are sold at low prices, with the captive products being the games and accessories that are required to fully enjoy the console.

Captive product pricing requires careful consideration of pricing and product mix, as the main and captive products need to be priced correctly to attract customers while still generating profits. This pricing strategy can be beneficial for businesses in competitive markets to gain a foothold, increase sales, and retain customers.