From the series on pricing strategy, the following is called price bundling, product bundling, a compilation, or a package deal. This is when a customer buys two or more products or services together for one price instead of buying items separately for individual prices.
This is an interesting strategy.
There are many people who would argue that it’s not a pricing strategy but a marketing strategy.
At least, they are related. If bundles are put together and tested properly the result can satisfy your customer and positively impacts your profitability. For example, the right bundle can:
- Increase your overall sales
- Increase your average sale
- Increase your gross profit margin
- Decrease your marketing cost
Example of Bundle Pricing Strategy
Essentially, price bundling offers several products or services for sale as a combined product.
Think about your last fast food visit. If you request to buy one or two single items were you asked if you would like to make it a combo?
Or, if you were with your kids did you end up purchasing a kids meal?
This is an example of bundling everyone can relate to.
Also, the example of the kids meal illustrates that bundles do not have to be made up of the same type of products. A regular combo maybe a burger, fries, and a drink - which are all food items. Unlike the regular combo, the meal for kid's includes food items + a toy.
All inclusive vacations are another example; you get hotel, flight, car and food plan all for one price.
In the business to business (B2B) world you’ll find many solution oriented bundles – products or services bundled to solve specific problems.
For example telecommunication companies often bundle phone and the internet.
Some bundles are taken a step further and packaged in a way that they speak to a specific audience, like the example of a phone and the internet which is geared to small businesses.
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How to Leverage Bundle Pricing?
To successfully use this pricing strategy, you have to create bundles where the perceived value exceeds the asking price.
If you get the right value in front of the right customer at the appropriate price you’re more likely to make a sale.
Bundling is most successful when:
- The average cost per unit lowers through increased production
- The average total cost of production decreases as a result of increasing the number of different products produced
- Marginal costs of bundling are low
- 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
Used properly, the bundling pricing strategy can be very beneficial. But it’s not right for every business. We recommend to making sure it’s right for your company before selecting the right pricing strategy.