and because of that choice, the espn family of channels now consumes a double-digit percentage of your cable bill. there are risks to “throwing in” products (detailed in a later section), especially if that product is cheap compared to other items in the bundle. for subscription services or saas companies, however, bundling expands the use cases for a product. at a minimum, bundles encourage product sampling and exploration, which could help an acid rock aficionado discover the joys of an aria (or motivate a new software user to learn advanced skills). while the potential business benefits of bundling are clear, the process to implement a successful bundling strategy is murky.
additionally, and most surprisingly, people were willing to pay $225 for one piece of luggage and $54 for another when purchased separately—but only $165 for the items as a bundle. the consumer doesn’t need to take a mental shortcut to estimate value, and the categorical thinking effect doesn’t occur. an extensive study of nintendo sales of hardware (consoles) and software (games) showed the potential impact—and limitations—of bundling, especially bundle pricing, which may motivate consumers to enter a market more quickly or for the first time. likewise, a bundled price for a loveseat and sofa makes sense—most living rooms have one of each, and consumers want them to match. the diverse benefits of bundling to sellers—which extend well beyond near-term revenue—are a strong incentive to invest the time in strategy and testing to get it right.
one afternoon last year an employee of mine in the u.s. made yet another run to the local baby store to buy a box of diapers for his two year old son. eager to minimize his trips to the baby store and to speed the potty training process, the father bought the bonus-size box, happy in the knowledge that he was spending less at each visit to the changing table. the roots of this practice can be found in economics. basically, you and i buy things when our perceived value of what we want exceeds the price that we are asked to pay (aka, a consumer surplus). in the business-to-business environment, contracts often contain solutions-oriented bundles, i.e., a combination of products and services that are customized to solve specific customer problems. unfortunately, we find that companies often treat bundling as purely a marketing tactic versus a component in a broader pricing strategy.
a final sale price, for example, can be adjusted by a number of basic elements including the amount of product delivered, the quality of the product delivered, premiums and discounts, the time and place of the transaction, the time and place of delivery, and the form of payment. a client in the internet space provides a good case study. competitive and market research showed that its customers had a high level of interest in a performance guarantee and that no competitor offered one. testing and research by the pricing manager, however, found that a portion of the company’s value-conscious customers (i.e., those purchasing the more expensive and full-featured services) were willing to pay a premium for the feature, while more price sensitive customers placed little to no value on it. price bundling should be a core component of every company’s pricing and segmentation strategy. paul hunt is the president of pricing solutions, an international pricing strategy consultancy dedicated to helping clients achieve world class pricing competency. paul publishes a weekly pricing column in the fp executive.
marketing simplicity. if you sell 20 products, you have to market 20 products. if you bundle them as what this father encountered is a good example of price bundling, the strategy of selling various products or in marketing, product bundling is offering several products or services for sale as one combined product or service, product bundling examples, product bundling examples, bundling strategy, product bundling strategy, product bundling statistics. bundling is a marketing strategy that consists of companies selling several products or services together as a single combined unit, often for a lower price than they would charge customers to buy each item separately.
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