Product Line Pricing

Abstract

Companies rarely produce and market just one product for which a single price and a specific marketing strategy is developed. Rather, they produce a line or several lines of products with a multiplicity of options that are marketed to defined customer segments. No longer is it possible or for that matter plausible to make pricing decisions with respect to a single product in isolation.

In 1921, an executive committee at General Motors Corporation headed by Alfred Sloan made three decisions that would affect the firm’s product policy to this day. The first was to enter the low-priced mass market and compete directly with Ford, the industry leader. The second was to limit the number of product categories, while the third was the avoidance of price overlap between designated product lines.

While there has been a change in brand name (Oakland to Pontiac) and prices now overlap between categories, the essence of the differentiation of product lines by price remains intact to this day. The original price categories were as follows:

Chevrolet below	$ 600
Oakland	$ 600–900
Buick (4-cylinder)	$ 900–1,200
Buick (6-cylinder)	$1,200–1,700
Oldsmobile	$1,700–2,500
Cadillac	$2,500–3,500

(See Alfred P. Sloan, My Years with General Motors, reprint edition (New York: Anchor, 1972))