A captive product is an item that is useless without another specific product, and is often priced higher than the main item. Examples include refill cartridges and razor blades. Companies use captive pricing to earn additional revenue and encourage customer retention. Some captive products can enhance the main item, while others may be made by a different company.
A captive product is an item that is manufactured to be used only with another specific product. The name refers to the fact that the core product is typically useless without the other piece, so the customer is essentially held captive by the company that makes it. Captive pricing of products is a common marketing strategy where both items are considered when deciding on a selling price.
Some examples of captive products include refill cartridges for pens, replacement capsules for specialty coffee machines, and razor blades that only work with a certain brand of razor. There are also several types of equipment in the manufacturing industry that require one or more captive products to function properly. In addition to earning additional revenue from captive products, businesses can sometimes depend on customer retention because they don’t want to spend money on a new main item.
In most cases, a captive product is made by the same company that manufactures the item they are to be used with. For this reason, the pricing of these items is often planned with the parent item in mind. Often, the captive product will have a higher relative price than the item it is to be used with
A captive product is typically priced to earn the majority of revenue associated with a product. Many companies will value the primary product at a loss to attract new customers. So the captive product will recoup both the lost money and most of the profits associated with the product.
There are some captive products that are made for only one product type but are not required for that item to function. These additional pieces can be used to enhance the product. They are useless by themselves. Some companies will encourage customers to spend increasing amounts of money by offering accessories and other supplemental offerings at higher prices. These strategies can form the core of a company’s expansion plans.
In some cases, a captive product will be made by a different company than the one that manufactured the primary product. These companies may cooperate, although this is rare, as there is limited value to the primary product producer. In rare cases, another company may make a captive product that competes with the company that made the parent product. This is often difficult to do due to trademark and patent issues.
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