Whether product bundling is a practice that adds value to a company is a question that remains without a blunt answer. And that is because it depends on how the bundling is designed and executed.
Product bundling is a technique in which several products are grouped together and sold as a single unit for a unique price, with a discount as a hook. A very well-known example of product bundling is McDonald’s Happy Meal. Other examples are: premium version of cars that come with air conditioning, sunroof and/or leather seats, all of them features that could be removed and sold as add-ons.
This practice (bundling) pursues an increase in the company profits explained by incremental sales from purchases that would not have been made otherwise. And there is the key… the difference between bundling to add value or bundling decreasing it.
Considerations to maximize the incremental value of a pricing bundle strategy:
Therefore, the effectiveness of product bundling depends on how this tactic is designed and executed, as there will be companies in which applying it could be detrimental, while in others sales could significantly increase because of it. Based on this premise, product bundling can be a very effective technique but is very important to design it wisely in order to get the most of it. Thus, as in every pricing strategy, it is key to analyze the historical data of sales at a granular level and structure a business case of what its intended to achieve in order to have a clear accountability of these initiatives.
Daniela León is a founding partner of Rentabiliza, Peru’s first Revenue Management and Pricing in Perú. She has an MBA by Chilean University Adolfo Ibañez and is an economist from Peru’s Universidad del Pacífico. During her successful career, she specialized in the Revenue Management, Strategy and Commercial Management fields in organizations dedicated to the provision of services in the hotel, tourism and commercial aviation sectors.