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Pricer’s Points: Product bundling: when is a good time to use it? | Matt Burnett

Microsoft CEO Steve Ballmer presents Microsoft Office 2013, a classic example of product bundling.

When is a good time to bundle different products/ services together?

Product bundling is what it sounds like: bundling multiple products into one package with a single price. It’s nothing new and is common in certain product categories: software (e.g.Microsoft Office), games consoles, airlines and even restaurants (the three course meal).

So why bundle? Product bundling can be good for several reasons:

  • It can improve your offer by easily providing a total price for all your associated products and services.
  • It saves the customer time from having to work out the total cost for themselves. (Remember that convenience and speed are key priorities for some customers.)
  • It can make it harder for your competitors to price match if they can’t identify which parts of the bundle are your most profitable. (This only works if you only sell the products as a bundle only and not separately.)
  • If you sell software, bundling different software applications together can be a good way of trying to bring more customers into your ecosystem.

So should you use product bundling?

It’s a difficult question to answer and a lot will depend on the competitive environment that you are in and what you are trying to achieve. I’ve highlighted the main benefits above.

Remember though that bundling does have its critics. A regular complaint is that it can make it difficult for consumers to compare products if different competitors bundle similar, but different, products together at different price points. Some also complain that businesses are not being totally transparent about their pricing when bundling products together. There is also the fact that some customers may feel unhappy if they think they’re paying for parts of a bundle that they’re never going to use.

However, remember the key rules if you do decide to bundle:

  1. Ensure you establish the value of the individual products before you set the bundle price.
  2. If you can, avoid mixing basic and premium products. As a bundle is a whole it can be difficult to highlight the individual components and could result in sending a confused message.
  3. Finally, decide if you are going to bundle or use a bonus item (think of games consoles again, which often throw in free games).

So, now you know what product bundling is, do you think there’s an opportunity for it in your business?

* This article was originally published on the MattBurnettBusiness.com – a blog about business, pricing and technology.

Hi, I’m Matt Burnett and I’m a pricing analyst for a UK DIY retailer and a graduate of the University of Portsmouth. I’ve previously worked at, The Southern Co-operative, IBM and Waitrose.

I’ll be using this blog to share my thoughts on topical business issues (mostly pricing) and my interests in technology. I’d love to hear your thoughts on anything I write.

If you wish to get in touch you can find me on both Twitter (@Matt_Burnett) and LinkedIn, you can also find me on Google+.

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