Definition: Price lining is a marketing strategy that employs prices to differentiate similar products that have distinctive features, attributes or degrees or quality. In other words, price ranges are used to categorize the products being displayed.
What Does Price Lining Mean?
This strategy is frequently employed by retailers to exhibit products of the same category like t-shirts or sandals. By grouping them by price range they can lead customers quickly to get the ones that they can actually afford. This technique can be also employed to increase affordability, by creating different levels for the product depending on the elements added to it.
For example, there can be a basic, an average and a premium version of the same product, and each of them will have different features and different prices, in an ascending manner. Customers have a wider range of choices that fit their current purchasing power. This strategy have proved profitable, since it increases the chances of closing a sales transactions, because of its broad reach to clients with different budgets.
Nevertheless, it also has disadvantages, like putting cost as the key driver of the purchasing decision. This sometimes takes away the possibility of leading the client to a sale that exceeds his initial budget but fits his needs more adequately.
Example
The Sock Store Co. is a company that sales socks in every shape, size, color and design possible. The store is very colorful and interactive for customers to pick individual socks and pair them with even other different models.
They have employed a price lining strategy in order to get the best out of this innovative approach. If you buy a pair of identical socks you pay $1.5 but if you match two different individual ones you pay only $1. Since they are trying to promote this as a new fashion trend the price lining strategy comes handy, by introducing an economic incentive. The store even has a “house selection” of pairs that don’t match each other.
