Definition of Price Lining

Price lining uses a single price or limited price range to sell a product. It is also known as product price lining: "lining" as in product line.

History

Price lining was pioneered by the so-called five-and-dime stores, which were retail stores offering every item at either 5 cents or 10 cents. Woolworth's is well-known for being one of the first to implement such a retail concept. The method of price lining is used to attract the maximum amount of buyers at price points that can be applied to a large range of products. Price lining can be executed in various ways.

Single Price for All Items

Imposing a single price for all items is a type of price lining where all items are sold at the same price or at a limited price range. For example, discount stores that sell all items for $1 or sell all items at a maximum price of $10 operate under this price lining method. The price is set using a single price or price range, not based on the product selection. This encourages the buyer to purchase several items in one shopping visit.

Single Price for Similar Items

Imposing a single price for similar items is a type of pricing lining where similar items are sold at the same price. Department stores commonly use this method to group products, for example, purses in a variety of styles, at the same price. The group may contain styles that are clearly different, but the price is the same for each item in the group.

Price Range for One Product

When retailers employ a price range for one product price lining strategy, only one type of product is sold with a range of prices. A manufacturer uses this method to offer a product, like refrigerators, at prices that reflect a good, better, best quality separation. In cases where a buyer has little or no knowledge of the product's features, cannot easily test the features or the features are inside the product (for example, electronics), then price lining is an indicator that differences do exist.

Benefits

Price lining is attractive to buyers and streamlines the decision-making process. Price conscious buyers can purchase based solely on price and without requiring extensive knowledge about the product. Fewer factors are involved in the buying decision, which increases the buyer's confidence in making a selection.

Price lining is an affordable way to increase the seller's profitability. Establishing a single price structure reduces the overhead, operations and labor costs associated with using multiple prices across multiple product lines.

Considerations

Price lining does not easily allow the seller flexibility when economic forces require a price increase. Price lining can also be applied to service options, for example car washes or electronic warranties.

References

• Market Pricing: Price Lining Method