Bundling (marketing)
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In marketing, product bundling is offering several products for sale as one combined product. It is a common feature in many imperfectly competitive product markets. Industries engaged in the practice include telecommunications, financial services, health care, and information. A software bundle might include a word processor, spreadsheet, and presentation program into a single office suite. The cable television industry often bundles channels into a single tier. The fast food industry combines separate food items into a complete meal. A bundle of products may be called a package deal, a compilation, or an anthology.
Most firms are multi-product companies faced with the decision whether to sell products or services separately at individual prices or whether combinations of products should be marketed in the form of "bundles" for which a "bundle price" is asked. Price bundling plays an increasingly important role in many industries (e.g. banking, insurance, software, automotive) and some companies even build their business strategies on bundling. In a bundle pricing, companies sell a package or set of goods or services for a lower price than they would charge if the customer bought all of them separately. Pursuing a bundle pricing strategy allows you to increase your profit by giving customers a discount.
Bundling is most successful when:
Product bundling is most suitable for high volume and high margin (i.e., low marginal cost) products. Research by Yannis Bakos and Erik Brynjolfsson found that bundling was particularly effective for digital "information goods" with close to zero marginal cost, and could enable a bundler with an inferior collection of products to drive even superior quality goods out of the market place.
Venkatesh and Mahajan reviewed the research on bundle design and pricing in 2009.
Pure bundling occurs when a consumer can only purchase the entire bundle or nothing, mixed bundling occurs when consumers are offered a choice between purchasing the entire bundle or one of the separate parts of the bundle.
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