By-product is a product which is produced in addition with the main product from the raw materials. In every organization which produces some sort of product there must also be the byproduct or the raw product. For example in the extraction of petrol or in textile industries which produce the main product also produces the byproduct like crude oil. The essential or the main product is expensive while on the other hand the byproduct is less expensive product.
The pricing of the byproduct has significant benefits in the pricing of the main product, as some time the price of the main product is kept low due to the price of the byproduct which can generate more revenues for the organization along with the main product. Price can be maintained by pricing the byproduct lower and the main product higher. One of the examples of the byproduct is the processed meat which is preserved for the future use while the byproducts like the bones are used for the food of the pets like cats and dogs.
[large]In any business around the globe if we closely observe, we will get to know that the pricing plays the key role in the sales of the product. And most of the people like to have the best product in fewer prices which they can afford easily. For such factor the pricing of the byproduct has a vital role to play. As such organization keep the price of the byproduct in such a way that it can control the rising price of the main product, and if there is some loss in the income of the organization that can be handled by the price of the byproduct. Although the byproduct pricing is several times lower than the main product but still it has the ability to control the overall profits for an organization and making profits even better (Kotler, Keller and Jha, 2012).
The byproduct pricing also help the organization to control the price rates in the market, it maintained the price of the product in such a way that the rising price of the products can be raised gradually as compare to the other products. Along with this it can give maximum benefits to the organization and play a key role in the establishment and success of the organization.
The process to setup the price for the byproduct is very hard and difficult task, because its price can be set according to the price of the main product in order to make the price of the main product more effective and competitive. As there is no magical formula for this, thus the analysis of the market is very important in order to observe what are the demands and the price of the main product and according to that the price of the byproduct can also be adjusted. This may have the positive and better effects on the market and also makes the organization to take more advantage from the byproduct pricing, it will also control the main product pricing thus make it easier for the organization to improve the productivity Louis E. Boone and David L. Kurtz (2013).
References
• Kotler, Keller, Koshy and Jha (2012). Marketing Management. Pearson.
• Louis E. Boone and David L. Kurtz (2013). Contemporary Marketing.