Complementary Pricing:
Complementary goods are one which is jointly demanded .e.g. Petrol and Car, therefore a complementary price set can affect both the goods jointly demanded, .e.g. if the price of car rises people might stop buying car, resulting in a fall in the demand of cars plus few cars means few people consuming petrol, which in turn also reduces the demand for petrol.
How do businesses use complementary pricing to make a profit? Let’s take a look at an example, let’s say Gillette sells a razor at price which is just a bit above its cost line, but the blades which are jointly demanded are sold a high profit margin, therefore although they do not make a good profit by selling razors but they do earn a good profit by selling the blades.
Volume Discounting:
Volume discounting is when you charge lower prices on bulk purchasing.
Price Discrimination:
The use of price discrimination means that the same product can be sold at different prices to different markets, but it largely depends on market conditions. Market can be segmented in 4 ways:
1. By Country Markets
2. By Product Version
3. By Place
4. By Time .e.g. off peak call charges
Minimum Pricing:
Under this method, the firm charges the minimum price which covers its costs. The costs includes: The incremental costs and the opportunity costs. This method would only be used by firms when entering into a market, as this methods results in no profit being made, which is against the basic aim of businesses ‘PROFIT MAXIMISING’.
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