Bundle Pricing

You might have purchased different combos or packages made of several products. Moreover, you must have saved some amount while buying them. The overall price of these bundles or packages is the Bundle Pricing.

Definition: Bundle Pricing is a popular pricing strategy where a group of individual products are sold together as a single product whose combined price is lesser than the particular product’s price.

Its alternative names are ‘Product Bundling‘ or ‘Product Bundle Pricing‘.

Marketers group three or more related, similar or multiple products or services to form a bundle. It increases the products’ overall value and is considered a separate individual product.

The psychology behind creating bundles is encouraging customers to buy more of the company’s offerings. This is because, every marketer wants to become profitable by selling as much as possible.

In addition, companies club slow-moving products with higher ones and increase their revenue.

Similarly, it is also valuable for the customers as it enhances customer satisfaction. The reason is that they can buy multiple products in a single transaction at lower prices.

For example, in a box of Cadbury Celebrations, you get several Cadbury Chocolates at a single price. Besides, Car Insurance & Servicing, Mobile Recharge and Travel Packages are more examples.

Content: Bundle Pricing

1. Example
2. How to Calculate Bundle Price
3. Types
4. Calculator
5. Bundle Discount
6. Advantages
7. Disadvantage
8. Bottom Line

Bundle Pricing Example

Bundling is something that we come across very often at Banks and Shopping websites. Some examples explaining product bundling are given below:

1. Travel Packages

The tourism industry mainly uses bundle pricing as its pricing strategy. This is because, they include everything that is required during the trip. For example:

• Hotel Booking
• Food
• Cab Facility
• Flight Tickets
• Guide, etc.

2. Automobiles

While purchasing cars from any showroom, the salesman introduces various packages to you. These packages contain quotations offering additional things with car like:

• Insurance for 2-3 years
• Free Servicing
• Car Accessories
• Seat Cover
• Music System, etc.

Customers can choose from the available packages, giving them maximum value for price.

3. Mobile Recharge

Another example of product bundling is mobile recharge offers. When you scroll through the list, you see several combinations of services bundled together. If you choose the Jio plan of Rs.1099/-, you get the following services:

• 84 days Service Validity
• 2/gb Data per day
• Jio Subscriptions
• Netflix Mobile
• Unlimited 5G Data
• 100 SMS/day
• Unlimited Voice Calls

4. Banking

Banks combines multiple product or service into a single product. They charge a maintenance fee for the entire bundle. As a result, it benefits the bankers, and they generate higher profits.

How to Calculate Bundle Price?

At first, you need to identify the best combination of products that can satisfy customer’s wants. After that, you must conduct thorough market research and find a suitable segment.

Now, study the target customer’s behaviour and create a valuable package for them. Determine the total package price by adding the price of each package item. In addition, keep in mind the gross margin for each item and decide on appropriate discounts.

At last, create a competent and attractive marketing strategy that can increase sales and profitability.

Types of Bundle Pricing

On a broader level, companies can form two types of Product Bundling listed below:

1. Pure Bundling
2. Mixed Bundling

Pure Bundling

In this type of bundling, companies club highly integrated and compatible products. Customers have to buy the entire package or not at all. In other words, the package is unbreakable, and items can’t be sold individually.

Example: Microsoft Office, Education Programs or Courses are examples of pure bundling.

It has two sub-categories as follows:

• Joint Bundling: It is a simple bundle with two or more products sold for a single price. Being pure bundling, none of the products are available for sale individually.
• Leader Bundling: Here, the marketers add a bestselling or leader product with less popular products. As a result, the unpopular product sales increase due to the leader product.

Mixed Bundling

Here, the marketers sell both bundles and the individual products from the bundle. The total price of the package is lower than the net combined price of the product.

Like leader bundling, marketers put a leader product in the mixed bundle. However, customers have the privilege to buy the entire bundle or leader product alone.

Calculator

It is a way to compute the returns generated from several offers. It helps to compare any product or its combination with respect to price.

So, companies form, compare and determine the price of packages electronically. They can automate the calculation using Excel and readymade software.

SUMPRODUCT function is used for calculating bundle prices in Excel.

Bundle Discount

Usually, the total price of the package is less than the cumulative price of the individual product. The variance between the cumulative price and the final bundle price is the Bundle Discount.

Companies give discounts on bundles intending to make it more attractive & appealing. The discounted price lures customers and influences their purchase behaviour.

Suppose there are four products in a bundle, and their individual prices are as follows:

• 1 Burger for Rs.60/-
• Frech Fries for Rs.80/-
• Coke for Rs.30/-
• Small popcorn for Rs.70/-

The total of all four items is Rs. 240/-. But, the bundled price of these products is Rs.200/-. The balance figure of 40 is the bundle discount.

Advantages of Bundle Pricing

The distinguished benefits or advantages of product bundling are as follows:

1. Simplicity: It simplifies the buying process and making the purchase decision.
2. Increase Sales & Profit: People often purchase more units by purchasing bundles.
3. Move Unpopular Products: Some unpopular products also get sold as part of the bundle.
4. Reduce Cost: Promoting multiple products as one reduces two major costs, i.e., marketing & distribution.
5. Clear Excess Stock: Companies often group the excess products with the popular ones. It will help them maintain low inventory and save costs.

Disadvantage of Bundle Pricing

There are many disadvantages of product bundle pricing given below:

1. Individual Products: Customers may not find packages useful. They might have a habit of buying the required product only.
2. Unwanted Products: Customers may not need the products or services from the bundle. They might prefer to buy the required product individually.
3. Confusion: Bundles may confuse the consumers and develop an inability to decide.
4. Unbalanced Features: The features offered in the package may or may not justify the price.

Bottom Line

Bundle pricing is a marketing strategy in which products are sold in packages or bundles. This bundle is available for a single price, which is considerably less than the individual product prices.

Purchasing in bundles benefits both the customers and the company. However, obtaining a correct and valuable bundle is a challenging task. This is because the right bundling attracts customers and yields them higher satisfaction.