Price lining is a product differentiation strategy, which is defined by the company’s capabilities of producing lines of different products in order to appease every segment of the market, ensuring greater exposure and the potential to claim market share.
Explanation:
While small companies can be content with creating a product or a service to a specific segment of the market, large corporations often have the capacity to expand beyond these initial limitations and claim additional market share by catering to different groups of people.
A smartphone company like Huawei, for example, is known for its variable line of smartphones, ranging from very cheap gadgets with basic functionality and ending up with top of the line flagships capable of challenging Samsung and Apple products in terms of status, appearance, and capabilities.
This strategy is known as price lining, which is based on identifying the needs and paying capabilities of different groups of people. Using this strategy allows companies to expand sales and achieve better brand recognition, in addition to benefiting from the economy of scale.
However, such an approach requires significant expenditures in market research, product design, and product diversification, making it a difficult line of approach for small and medium-sized businesses, which tend to focus on one or two main product lines.
Failure to successfully identify the needs and paying capacity of the target market population groups could potentially lead to reduced sales, loss of profit, and brand name damage. For example, a company known for its high quality of merchandise cannot afford to make an unreliable or low-quality product even for the cheap segment of the market without suffering a loss of face.