A captive product is an item that is produced for use only with another specific product. The name refers to the fact that the primary product typically is useless without the other piece, so the customer is in essence held captive by the company that produces it. Captive product pricing is a common marketing strategy in which both items are considered when deciding upon a sale price.
Some examples of captive products include refill cartridges for pens, replacement pods for specialty coffee machines and razor blades that work only with a certain brand of razor. There also are several kinds of equipment in the manufacturing industry that require one or more captive products to function properly. In addition to earning additional income from captive products, companies can sometimes depend on keeping customers because they do not want to spend money on a new primary item.
In most cases, a captive product is made by the same company that produces the item with which they are to be used. For this reason, the pricing for these items is often planned with the primary item in mind. Often, the captive product will have a higher relative price than the item with which it is to be used
A captive product typically is priced to make the bulk of income associated with a product. Many companies will price the primary product at a loss to attract new customers. Then the captive product will earn back both the money lost and the bulk of the profit associated with the product.
There are some captive products that are made for only one kind of product but are not necessary for the operation of that item. These supplemental pieces can be used to enhance the product. They are useless on their own. Some companies will encourage customers to spend increasing amounts of money by offering accessories and other supplemental offers with higher prices. These strategies can form the core of a company’s expansion plans.
In some cases, a captive product will be made by a different company than the one that manufactured the primary product. These companies might work together, though that is rare, because there is limited value for the producer of the primary product. In rare cases, another company might make a captive product that competes with that of the company that made the primary product. This is often difficult to do because of trademark and patent issues.