INCREASING NUMBER of companies are realizing the value of combining separate elements of their product lines into bundles. Creating a bundle is like creating a new product. Thus bundles, like new products, can be instruments for implementing company strategy. Although bundles act like new products in the marketplace, they are typically much less expensive and risky to create. Also, given the important market advantage of reduced product introduction time, bundling has an added appeal. This article is devoted to the strategic use of bundles and bundle pricing.
A bundle is a group of products or services offered as a package. Bundles can have a wide variety of features. Some bundles include some items that are not available separately. Other bundles are offered at a price less than the sum of the individual item prices. Still other bundles endow the buyer with entitlements such as priority seat selection. In the case of a pure bundle, all items must be purchased as a complete package; they are unavailable any other way. As consumers we see the marketing aspect of bundling, but decisions about bundles aren't (or at least shouldn't be) the sole province of the marketing department. Bundling decisions typically have serious cost and strategic considerations and thus deserve the attention of general management. Consider the following example:
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