A complementary product is an item that is bought together with the main product. These products are used in conjunction, so complementary goods often bring little value or can’t be used separately, such as petrol, SIM card, and 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?
To boost sales, retail stores often decrease the price of a basic item and increase the price of its complementary product. Such a bundle seems beneficial to consumers. Retailers analyze customer demand and place these bundles close to each other. This is how stores sell razors and blades, flour and baking powder, laundry detergents, and fabric softeners. Companies can increase their sales volume and revenue this way.
However, complementary products have negative cross elasticity of demand. It means that if the price for the main item increases, consumer demand for its complement decreases since it often brings no value just by itself. Hence, companies’ sales volume decreases significantly, and retailers have to drop the price of the main item to cover the costs.
Complementary products are sometimes confused with substitute products, so let’s make the difference between them clear.
Complementary Products vs. Substitute Goods
Complementary products are closely related to the main product. They often can’t be consumed alone. Therefore, the demand for the main product generates the demand for its complement. Marketers either sell them together or promote a complementary product after selling the main item. This way they can increase sales.
Substitute products have the same features as the main product and solve the same problem. Hence, they can be used interchangeably. For example, customers can buy margarine instead of butter, Samsung Galaxy instead of an iPhone, and Xbox instead of Play Station. Consumers look for substitutes when the price for their desired product increases, as a result, the demand for this item decreases.
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. These are goods that can’t be consumed without the main products, for example, a SIM card without a mobile device, gasoline without a car, baking powder without flour. Now we’ll share some examples of complements that are promoted together with their main product:
- mobile device accessories (cases);
- boot polish;
- tennis rackets and a ball;
- game consoles and games;
- hair straighteners and heat protection;
- laptop bags;
- 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.
References
- 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: 22.03.2023
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