UNIVERSITY OF SOUTHERN MINDANAO

PRICING PALMA CLUSTER CAMPUSES

STRATEGY
GROUP #1
MEMBERS:

ABADINAS, JESSA E.
ADORADO, CHERVEN C.
AGUILLON, CRISTINE JOY S.
ALINTAJAN, ROGEN F.
BASTEZ, CLARENTH JAY J.
BEDAÑO, JAME WELL P.
 UNIVERSITY OF SOUTHERN MINDANAO
PALMA CLUSTER CAMPUSES

Adds-on, Accessories, and

Complementary Products
 TOPIC OUTLINE
I. Adds - on Pricing Structures

II. Price Segmentations Adds - on Price Structures

III. Influence of Price Level in Adds - on Price Structures

a.) Signposts Effects
b.)Optional Equipment Effects
c.) Network Externalities
d.) The Lock in Effects
 INTENDED LEARNING OUTCOMES

Discuss the Adds on price structures, price segmentation

adds on price structure, and the influence of price level

Understanding the effects influencing of price level in Adds

on price structures.
 ADD-ONS, ACCEORIES AND
COMPLEMENTARY PRODUCTS
Many products are the gateway to Additional Add-on Modules
or optional accessories, add-ons and accessories are found in
tangible and intangible goods, Durables and Consumables, and
business and consumers products.

There are subtle effects arising from consumer behavior that

can drive changes to the pricing structure away from that which
would be predicted from pure economic trade offs alone.
  A. ADD-ONS PRICING STRUCTURES
Add-On Pricing is the default approach for most products
and the approaches is relatively unlimited in its application.

Pizza Optional Features

Pizza Toppings Mobile Handsets
Automobiles Mobile Accessories
 ADD –ON PRICE STRUCTURE

Distinct products are priced and sold individually.

The products may be independent complements, wherein the
purchase of any one product increases the likelihood of the
purchase of any other complementary products, but each
product can provide benefits independently.
 CONTRIBUTION MARGIN

Executives must determine if the contribution margin will be

similarly to that of a tying arrangement, in which
%cm (A) < %cm (B), or similar to that tariff in which
%cm (A) > %cm (B), or Relatively constant in which
%cm (A) = %cm (B).

(A as Main Product - B as Add-Ons)

  B. PRICE SEGMENTATION IN ADD-ONS
PRICE STRUCTERS

In add-ons price structure, customer can select the specific

features that he or she desires.

Different customer may have different levels of demand for a

specific accessory.
Demand for one feature may be high for some customers and
low for others.

Plotting a demand for feature along each of their features, and

connecting these demands for customer segments creates a
spider diagram of the demand profile for that customer.

Different customers will have different demand profiles.

  C. INFLUENCES TO PRICE LEVELS IN
ADDS ON PRICE STRUCTURES

• There are consumer behavioral effects that enable firms to

capture higher margin either the add-on modules or the base
products. Some better understood effects are the SIGNPOST
EFFECT, OPTIONAL EQUIPMENT EFFECT, NETWORK
EXTERNALITIES, AND THE LOCK-IN EFFECT.
 SIGNPOST EFFECT

The sign post effect argues for a low price on popular or

frequently purchased products to induce purchase of les popular
or infrequently purchased items that are price to yield at a higher
relative contribution margin.
The signpost effect arises from customers lacking full
information of all comparable offers.
The basic premise of the signpost effect is that prices on certain
items can signal the customer the price of other products.
 OPTIONAL EQUIPMENT EFFECT

Manufacturers have something of a monopoly over factory

installed optional equipment, and as such they can use these
add-on items to effectively price segment to some degree.
Is a practice of pricing of a base product relatively low to
capture customer while simultaneously pricing the tied
complements relatively high due to a lower price sensitivity
of customers for these add-on units
 NETWORK EXTERNALITIES

or network effect is a phenomenon whereby increased

numbers of people or participants improve the value of a
good and services. 
 THE LOCK IN EFFECTS

Refers to situation in which consumers are dependent on a

single manufacturer or supplier for a specific service, and
cannot move to another vendor without substantial costs or
inconvenience.
 SUMMARY

• Add-On Pricing is the default approach for most products and

the approaches is relatively unlimited in its application.
 REFERENCE
• Chapter10 –Add-ons,Accessories,andComplementaryProducts(video
file) available from <(263) Chapter 10 - Add ons
, Accessories, and Complementary Products – YouTube>(may 2 2022)
THE END