Product Line Design with Pricing Kits

Abstract

In the context of growing demand for individualization and increasing propagation of modularization and mass customization, it is necessary to combine the opportunities of product individualization with an appropriate pricing system. In contrast to patterns of pure product line design and pricing, the new concept of pricing kits provides a strategy which transfers the flexibility of product configurations to price setting. A mixed-integer programming model in order to determine an optimal pricing system for all product components as well as promising extensions for the combined use with complete product strategies are proposed. It is shown that the new approaches are superior to established methods of pure product line design, especially in cases of uncertain parameters.