Final answer:
Cox's 20 percent discount for internet and cable package sign-ups is an example of bundle pricing, aimed at providing value to consumers while encouraging them to buy multiple services. Such strategies are designed to increase customer retention and leverage consumer perceptions of cost savings as a way to boost sales.
Step-by-step explanation:
The pricing strategy in question that Cox is employing by offering a 20 percent discount for customers who sign up for home internet with one of their cable packages is known as bundle pricing. This strategy is effective because it combines multiple products or services into a single package at a reduced rate compared to purchasing the items separately. Consumers often perceive this as a value proposition, which can increase sales and customer retention. Cable companies, like Cox, frequently utilize bundling as a way to offer better prices for cable, internet, and phone services in a package deal. This approach encourages consumers to purchase more services from the same provider, potentially leading to increased loyalty and reduced likelihood of switching to competitors.
Bundle pricing is closely related to other concepts such as tiered pricing, which is used by on-demand Internet streaming media providers like Netflix, where different levels of service access are offered at different price points. Understanding customer elasticity, or how quantity demanded changes in response to price changes, is crucial for businesses when considering pricing strategies.