What does captive pricing typically involve?

Captive pricing typically involves selling a core product at a low price while charging a premium for necessary accessories or complementary products. This strategy is particularly common in industries where the initial purchase of the main item, such as printers or gaming consoles, is offered at a lower cost to attract customers, but ongoing revenue is generated through the sales of consumables or accessories that are essential for the core product's functionality.

For example, a printer may be sold at a low price, but the ink cartridges sold separately can be quite expensive. This not only ensures a wide customer base for the initial product but also creates a continuous income stream through the sales of the necessary accessories, effectively locking customers into needing to purchase those items from the same company. This method is effective because it allows companies to increase perceived value and profit margins, creating a long-term relationship with customers who are reliant on the core product and its necessary accessories.