Price building and non-linear pricing are two strategies used by businesses to determine the pricing structure for their products or services. Additionally, “pure building” and “mixed building” are terms often used in the context of price bundling, which is a specific form of non-linear pricing.

1. Price Building:

Price building involves breaking down the overall price of a product or service into its constituent parts. This allows customers to see the individual components and understand how the final price is determined. It can enhance transparency and help customers perceive the value they are receiving.

For example, a computer manufacturer might list the price of a laptop along with separate costs for additional RAM, a larger hard drive, and extended warranty. This approach can be beneficial when customers value customization and want to understand the cost breakdown.

2. Non-Linear Pricing:

Non-linear pricing means that the relationship between the price and the quantity purchased is not strictly linear. In other words, the price does not increase or decrease proportionally with the quantity or usage.

There are two main types of non-linear pricing:

• Pure Building: In pure building, customers are charged separately for each component or feature they choose. This allows for a high level of customization but can potentially make the pricing structure complex.

  For example, a software company may charge separately for the core software, additional modules, technical support, and updates.

• Mixed Building: Mixed building combines elements of bundling and unbundling. It offers pre-defined bundles of products or services while also allowing customers to add individual components if they wish. This provides a balance between customization and simplicity.

  For instance, a mobile phone plan may have pre-set bundles for talk time, data, and messaging, but also offer add-ons like international calling or extra data.

Mixed building is often a preferred approach as it provides a balance between customization and simplicity.

Both pure building and mixed building can be effective strategies depending on the nature of the product or service, customer preferences, and competitive dynamics in the market. Businesses need to carefully consider their target market and value proposition when choosing between these approaches.