A complementary product is an item that is bought together with the main product. These products are used in conjunction, so very often the complementary goods bring little value or even can't be used separately. For example, petrol, SIM card, baking powder.
In this article, we'll explain why brands use complements, show the difference between them and substitute products, and provide some examples.
Why do brands use complementary products?
They increase their sales volume and revenue this way. To boost sales, retail stores often decrease the price of the basic item and increase the price of the complementary product. Such a bundle seems beneficial to consumers. Retailers analyze customers' demands and place these bundles close to each other. This is the way stores sell razors and blades, flour and baking powder, laundry detergent, and softener.
However, complementary products have negative cross elasticity of demand. It means that if the price for the main item increases, the consumers' demand for a complement decreases since it often brings no value alone. Hence, the sales volume decreases significantly and retailers have to drop the price for the main item to cover the costs.
Complementary products are sometimes confused with substitute products, so let's make the difference clear.
Complementary Products vs Substitute Goods
Complementary products are closely related to the main product. Very often they can't be consumed alone. So, the demand for the main product generates the demand in its complement. Marketers sell them either together or promote a complementary product after selling the main item. This way they increase sales.
Substitute products have the same features as the main product and solve the same problem. So, they can be used interchangeably. For example, customers can buy margarine instead of butter, Samsung Galaxy instead of an iPhone, Xbox instead of Play Station. Consumers look for substitutes when the price for the product increases, as a result, the demand for the initial product decreases.
So, now you see the difference and realize the economic connection between complementary and substitute products. It’s time to check out some examples.
Examples of Complementary Products
We’ve already mentioned some examples of complementary products above. These were goods that can’t be consumed without the main products, for example, a SIM card without a mobile device, petrol without a car, baking powder without flour. Now we’ll share some examples of complements that are not obligatory for using the main product, still, they’re promoted together.
- mobile device accessories (case);
- boot polish;
- tennis rackets and a ball;
- game consoles and games;
- hair straightener and heat protection;
- laptop bag;
- cartridges for a printer;
- spices for meat and fish;
- laces for sneakers;
- DVDs for DVD players;
- bullets for guns;
- brushes for eyeshadows
Congrats, now you know why brands sell complementary items, realize the difference between them and substitute products, and know some examples of both.
- This article defines complementary goods and provides examples.
- This article offers a complementary goods graph.
- This article explains how firms make use of complementary goods.
- This article covers the issue of cross elasticity of demand for complements.
Last Updated: 31.05.2021