Complementary Goods

Complementary goods. We all know what they are in some way or another. Think of great pairs like cereal and milk. If you buy cereal, you’re probably going to buy milk to go with it. 

Complementary goods are products that tend to be sold together because each product adds value to the other. Generally, these goods may be used or consumed together. In economics, demand for one product equates demand for the other. Strong complementary goods can’t be used without the other. 

We can see examples of complementary goods in our day to day lives. For Valentine’s Day, one could argue that flower and gourmet chocolates are complementary goods. Even within that example, maybe the flowers have the option to come with a vase, balloon and an expertly handwritten card. Companies will use this knowledge of the industry to create new product lines and increase sales. If you are going to purchase flowers and a plushie, you might as well buy them at the same place, potentially from the same company or supplier. 

Complementary goods can be categorized as weak or strong. I would say movies and popcorn are weak complementary goods because consumers can choose other options without losing much value in the experience. Sure, they can be purchased and consumed together at a movie theater, but I have seen pizza, wings, and all sorts of dishes available at the movie theater. Furthermore, any potential price change in the food and beverage options will have little to no effect on the demand of the movie itself. 

If you can only realistically use and enjoy a product if you also had the second product, then they are most likely strong complementary goods. Take a tennis ball and a tennis racket, games and gaming consoles, and planners and planner inserts for example. Back to our Valentine’s Day example, a lovely arrangement of flowers is practically useless without a beautiful vase to contain and display the bouquet. The vase adds value to the enjoyment of the flowers.

An interesting side of complementary goods can be seen with companies who create distinct products or services that tend to be consumed together in our culture. The coffeeshop in a bookstore or a beauty supply store inside of a bigger supermarket are very current examples of the way complementary goods are changing. 

As you enjoy an assortment of bath products and a scented candle this Valentine’s Day, think of the goods that were deemed complementary to each other and were packaged together by a company or your loved one.