Captive products are products that are a necessity for use with other products, often a “host” product. (See the example of captive products below.)
Marketers will often set low prices for the host product and set high markups on the captive products. As an example, a physical razor blade shaver may cost the consumer $9.99 (US Dollars) to buy, however, the cost of the refill razor blades can cost as much as $35.00 for a package of five.
Example of captive products:
The following are some examples of captive products and their host product.
|Captive Product||Host Product|
|Memory Cards||Digital Cameras|
|Discounted Cell Phones||Extended Cell Service Contracts|
A critical factor of captive product pricing to note is that when marketers price the captive product too high, this can encourage counterfeiting of the captive products, driving the price down and ultimately hurting bottom-line profits of the original manufacturer.
Hewlett-Packard grew to dominate the printer business when it dropped its prices on printers and raised pricing on ink and specialty papers. As a result, their market share increased as well as their profits since consumers would spend more on the captive products, over the life of the printer. However, the marketplace began to see an increase in third-party ink manufacturers as well as ink refilling kits and services due to the high price of the manufacturer’s ink, the captive product.