Product bundling is a marketing strategy that involves offering several products for sale as one combined product. In popular usage "marketing" is the promotion of products especially Advertising and Branding However in professional usage the term has a wider meaning of In Marketing, a product is anything that can be offered to a Market that might satisfy a want or need This strategy is very common in the software business (for example: bundle a word processor, a spreadsheet, and a database into a single office suite), in the cable television industry (for example, basic cable in the United States generally offers many channels at one price), and in the fast food industry in which multiple items are combined into a complete meal. A spreadsheet is a Computer application that simulates a paper worksheet A Computer Database is a structured collection of records or data that is stored in a computer system In Computing, an office suite, sometimes called an office software suite or productivity suite is a Software suite intended to be used by typical The United States of America —commonly referred to as the Fast food is the term given to food that can be prepared and served very quickly Fast food is the term given to food that can be prepared and served very quickly A bundle of products is sometimes referred to as a package deal or a compilation or an anthology.
The strategy is most successful when:
- there are economies of scale in production,
- there are economies of scope in distribution,
- marginal costs of bundling are low. Economies of scope are conceptually similar to Economies of scale. In Economics and Finance, marginal cost is the change in Total cost that arises when the quantity produced changes by one unit
- production set-up costs are high,
- customer acquisition costs are high.
- consumers appreciate the resulting simplification of the purchase decision and benefit from the joint performance of the combined product.
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. Yannis Bakos is a professor at the Leonard N Stern School of Business at New York University Erik Brynjolfsson (born April 14, 1962) is the Schussel Professor of Management at the MIT Sloan School of Management and the Director of the MIT Center [1]
In oligopolistic and monopolistic industries, product bundling can be seen as an unfair use of market power because it limits the choices available to the consumer. An oligopoly is a Market form in which a Market or Industry is dominated by a small number of sellers (oligopolists In Economics, a monopoly (from Greek monos, alone or single + polein, to sell exists when a specific individual or enterprise has sufficient In these cases it is typically called product tying. Tying is the practice of making the sale of one good (the tying good to the De facto or De jure customer conditional on the purchase of a second distinctive
Pure bundling occurs when a consumer can only purchase the entire bundle or nothing, mixed bundling occurs when consumers are offered a choice between the purchasing the entire bundle or one of the separate parts of the bundle.
Pure bundling can be further divided into two cases: in joint bundling, the two products are offered together for one bundled price, and, in leader bundling, a leader product is offered for discount if purchased with a non-leader product. Mixed-leader bundling is a variant of leader bundling with the added possibility of buying the leader product on its own.
See also
- Tying (commerce)
- Freebie marketing
- Marketing
- Marketing co-operation
- Product management
- Package holiday
- Local loop unbundling
- Competition law
- Compilation album
Notes
- ^ See Bundling and Competition on the Internet and Bundling Information Goods: Pricing, Profits and Efficiency by Yannis Bakos and Erik Brynjolfsson. Tying is the practice of making the sale of one good (the tying good to the De facto or De jure customer conditional on the purchase of a second distinctive Freebie marketing, also known as the razor and blades business model, is the concept of either giving away a sellable item for nothing or charging an extremely low price in order In popular usage "marketing" is the promotion of products especially Advertising and Branding However in professional usage the term has a wider meaning of A marketing co-operation or marketing cooperation is a partnership of at least two companies on the Value chain level of Marketing with the objective Product management is an organizational function within a company dealing with the planning or marketing of a product or products at all stages of the Product lifecycle. A package holiday or package tour consists of Transport and accommodation advertised and sold together by a vendor known as a Tour operator. Local loop unbundling ( LLU) is the regulatory process of allowing multiple Telecommunications operators use of connections from the Telephone exchange 's A compilation album is an Album ( Music or Spoken-word) featuring tracks from one or multiple Recording artists, often culled from a variety of
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