Smarter Pricing: How to capture more value in your market

Block out competitors – pair up product and system

Competitors may sometimes be held at bay through separating two elements of a package. This is a tied consumables model. A subsidized master product, say an electric toothbrush, is offered that requires a consumable part, say a brushing head. The master product is patent protected such that other manufacturers are precluded from producing consumables that fit this system. By designing a printer as a machine with a proprietary ink cartridge, Hewlett Packard (HP) are able to succeed in a highly competitive market. HP win customers with a superior design of printer. It is sold at a competitive price to establish the HP system among customers and then capture value through the sale of HP ink cartridges. ...