Price bundling is a pricing strategy that involves combining two or more products in a single bundle so that the “bundled” price is lower than the total price of the individual products. This is also referred to as bundle pricing and product bundling.
Pros: Advantages of Price Bundling
Bundling products has been practiced in different industries by different companies as part of their pricing and sales promotion strategies. Examples include restaurants, telecommunication services providers, software developers, healthcare providers, and consumer electronics manufacturers, among others. More specific examples include the “meal deal” or “value meal” of fast-food chains such as McDonald’s and the “mobile plans” of network carriers.
The following are the specific benefits of this pricing strategy:
• Increases Sales Potential: This strategy can help businesses maximize their earnings. It allows a particular company to push its inferior products alongside its high-demand products. Furthermore, it is also ideal for clearing idle or old stocks in an inventory, as well as for introducing new products to consumers.
• Simplifies Buying Experience: Another advantage of price bundling or bundle pricing is that it makes the entire purchasing experience simplified and lessens the time it takes to make a particular purchasing decision by presenting similar or complementary products in a single bundle or package.
• Adds Value For the Consumers: Remember that the price of a “bundle” of products is lower than the total price of individual products. Bundle pricing gives an impression that consumers are getting more for less, thus providing them with a bigger perceived value per purchase and lessening after-purchase remorse.
Cons: Disadvantages of Price Bundling
Price bundling is not for everyone. Some businesses and products are not suitable for this strategy. There are customers who are not too keen on purchasing bundled products. It is important for business owners or marketers to understand how this strategy can affect their customers or impact their businesses because its failed implementation and communication can decrease the value of certain products and brands.
The following are the limitations of this pricing strategy:
• Specific Customer Preferences: There are customers who want to make their own purchasing decisions and do not appreciate businesses taking their choices away. Some customers also do not need all of the products contained in a particular bundle. This strategy requires understanding what the target market needs.
• Has The Potential To Incur Losses: It is also possible for a business to incur losses from inappropriately combining products and selling them under a single bundled price. Note that bundle pricing requires reducing the prices of selected products. Some products can generate a significant amount of sales when sold as standalone.
• Can Lead To Cannibalization of Product: Another notable disadvantage of price bundling or bundle pricing is that it can lead to product cannibalization in which an entire bundle of products displaces standalone products or it results in decreasing the individual value and appeal of each product within a bundle.