When you rent a car in Britain, you will be asked to pay the car rent...

When you rent a car in Britain, you will be asked to pay the car rent for ₤20 and GPS for ₤20. Explain the pricing method adopted in car company and why. Also take 2 examples with such pricing methods

Expert Solution

When we rent a car in Britain, we will be asked to pay a car rent of £20 and GPS for £20. The pricing method adopted in car company may be Bundle Pricing, this is because here the company is selling an unwanted product/service with an important one. Here the customer is only asking for the car but the company combines both the products( Car and GPS) and also charges for the both and hence this type of pricing strategy where an unwanted product is bundled with an important product is called bundle pricing. This may also be considered as a cost based pricing, because the company incures a cost to setup a GPS on the car and hence they include a certain percentage of the cost to the price of the car rent to cover their cost.

Bundle pricing strategy/method is followed mostly in auctions when there are some less important goods which have very less chance of being bought and hence they bundle a very precious good with many less important good and hence the bundle is sold for a very high price. Secondly it can be seen in the telcome sector where most of the companies make a bundle of their services and sell together like a bundle containing talktime + data + SMS etc.

Rahul Sunny answered 2 years ago

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