Describe the three strategies associated with the complementary pricing of a service?
What will be an ideal response?
In captive pricing, the firm offers a base service or product and then provides the supplies or peripheral services needed to continue using the service. In this situation the company could off-load some part of the price for the basic service to the peripherals. For example, cable services often drop the price for installation to a very low level, then compensate by charging enough for the peripheral services to make up for the loss in revenue. With service firms, this strategy is often called two-part pricing because the service price is broken into a fixed fee plus variable usage fees. This is used by telephone services, health clubs, and commercial services such as rentals. Loss leadership is the term typically used in retail stores when providers place a familiar service on special largely to draw the customer to the store and then reveal other levels of service available at higher prices. Cleaners, for example, will offer a special low price to launder men's shirts to draw customers in to pay the higher regular prices for other items.
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