Advantages of Bundling

Jacqueline Chaney

10/08/2011

Advantages of Bundling

As stated in investorword.com, “bundling is the practice of joining related products together for the purpose of selling them as a single unit”. Companies generally engage in this practice when they believe that two or more products and services packaged together may appeal to many consumers’ more than individual products. Bundling arrangements usually feature a special pricing arrangement which makes it cheaper to buy the products and services as a bundle rather than separate. For example, a local communications company may choose to offer a cable TV bundle that allows the subscriber to enjoy cable television, local telephone service, and Internet access as a single product, rather than having to purchase three different services at a cumulative higher rate. Bundling is also used to create a large market for a low value product by selling them for a relatively low price (or giving them away free) with the purchase of a higher value product (investorword.com). e.g. During the holidays, Best- buy, and many other electronic stores offer a free printer with the purchase of a laptop. The printer is used as an incentive to purchase that particular laptop, and quite possibly the price of the laptop includes a slight mark-up to cover the cost of the printer. In addition to this, purchasing the computer will lead to the purchase of replacement ink. The most common ways used to bundle products are: by product category, customers or application.

Where can you find the most recognized example of bundling? The last time you went through the drive-through at McDonald’s did you order an “extra value meal” or an “a la carte” burger, fries and drink? The majority of us view bundling of products as more advantageous over the “a la carte” items; it is normally cheaper to purchase the extra value meal instead of purchasing each item separately. Product bundling is also a common strategy with software products. For...