Kit Pricing (Price Setting)

Owned by Ondřej Tesař
Sept 30, 2024
2 min read

Kit Pricing is a pricing strategy that allows companies to accurately calculate the price of complex products based on their individual components.

Calculation

Kit Pricing means that a price for a given product is based on subcomponents and quantities defined in a Bill of Material (BoM) data table.

A Kit Price is a sum of all of its subcomponent prices multiplied by provided quantities. There is no limit on how many levels of “subcomponent of subcomponent” are defined. If more than one level is present, we sum all the prices “at the bottom of the tree” using proper quantity factors.

Limitations

  • All connected products must be added to the same price list/grid.

  • Because of technical limitations, Kit Pricing should not be used in the same price list/grid with Anchor Pricing.

References

Use Case Examples

Here are a few use cases for Kit Pricing pricing strategy:

  • Electronics Components Manufacturing – In this scenario, a company manufacturing electronic components has a Bill of Material (BoM) for each of its products, which lists all the components required to assemble that particular product. Using Kit Pricing, the company can calculate the price of the final product by summing up the prices of all its subcomponents, multiplied by their respective quantities. This not only simplifies the process of calculating the price of complex products but also allows the company to offer discounts and promotions on certain components, thus reducing their overall cost of production.

  • Furniture Manufacturing – A furniture manufacturer sells various products such as beds, sofas, chairs, etc., each with its own set of components. The price of these products is determined by calculating the total cost of all its subcomponents, including the frame, cushion, and covers. By using Kit Pricing, the company can easily adjust the prices of its products based on factors like the material used, the size of the furniture item, and other such parameters.

  • Automotive Industry – In the automotive industry, Kit Pricing is commonly used to calculate the price of a car by summing up the costs of all its constituent parts, such as the engine, transmission, body panels, and other components. By breaking down the price in this manner, the manufacturer can easily adjust the final price based on factors like material costs, production quantities, and demand.

Overall, Kit Pricing is a powerful pricing strategy that allows companies to accurately calculate the price of complex products based on their individual components, while also providing flexibility to adjust pricing based on various factors.