Chapter 69. Pricing Products with Tie-Ins
How does the fact that customers buy razor blades as well as razors affect the profit-maximizing price of razors?
Many products that are purchased by a customer result in the customer purchasing related products, or tie-ins. Here are some examples:
Original Purchase | Tie-In Product |
---|---|
Razor | Razor blades |
Menâs suit | Shirt and/or tie |
Personal computer | Consulting services to set up a network |
Video game console | Video game |
Using the techniques I described in Chapter 68, itâs easy to determine a demand curve for the product thatâs originally purchased. We can then use Excelâs Solver to determine the price for the original product that maximizes the sum of the profit earned from the original and the tie-in products. ...
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