Product bundling is putting various products into a bundle and offering them to the customer as a single product. It is a marketing strategy which involves combining various products or components into a bundled solution. Product bundling is popular with companies that offer multiple products or services and the constituents of the bundle are goods the company can sell on their own. A product bundle is made such that it has a special price and a quick calculation usually shows buyers that the bundle is cheaper than buying each product separately.
Product bundling is common in imperfectly competitive markets and industries that engage in product bundling include telecommunication, healthcare and banking. A prime example of product bundling can be drawn from the fast food industry where various foods are combined and sold as a single meal.
Types of bundling
There are two types of product bundling namely:
This is when a company/seller decides that a consumer can only buy the whole bundle as offered or nothing. This type of bundling is not very popular as a consumer is unable to buy the bundle in part apart from exactly how it is offered. Under pure bundling, two subtypes are present.
- Joint bundling – in this case, a bundled price is offered for both products
- Leader bundling – in this type, a leader good is offered at a discounted price if it is bought alongside a non-leader good.
- Another bundling variety, mixed-leader bundling, offers the possibility of a customer to buy the leader product as a stand-alone good and not as part of the bundle. It is a variant of the leader bundling.
Mixed bundling is non-constricting, unlike pure bundling, as a consumer has the option of buying the whole bundle as offered or buying the individual products making up the bundle. Mixed bundles are usually accompanied by a special price which beat the price of buying the constituent items individually.
Logic and psychology behind product bundling
For a company to benefit from product bundling, it needs to carefully find the right goods for the bundle whether pure bundling or just use mixed bundling. Customer perception is key to finding the right mix for a bundle and therefore, a company should always look to include goods that a consumer finds valuable or worthy in a bundle. The bundle should also be cheaper than buying the individual goods while the products included in a bundle should complement one another or be mates.