Core Concepts: Bundling
Liam Hannaford is the Content Marketing Associate at Ibbaka. See his Skill Profile on Ibbaka Talent.
Definition of Bundling
Bundling is when companies and organizations group together multiple products and services to be sold and managed together.
Bundles are meant to make it easier for customers to buy complementary goods and services. They make it clear what goods and services belong together.
Bundles often have special pricing associated with them. Bundles are not always cheaper than buying each element of the bundle individually. Sometimes the incentive to buy the bundle is the ease of purchase, or the bundle is enhanced with a higher service level or a special service or product that cannot be purchased any other way.
Designing bundles and pricing bundles are key parts of Ibbaka’s service. (Contact us if you are interested in learning more about bundling).
A bundle or a package?
The terms bundling and packaging are often used interchangeably.
At Ibbaka we use packaging to refer to how functions, data and services are combined into a product or a set of products with a well defined architecture (for example a tiered pricing architecture).
A bundle is a looser concept, bundles are often made up of different products with much less integration. Bundles are easier to assemble and change.
Generally, product management manages packages, while marketing puts together bundles. One will often create and price a bundle to support a specific campaign.
Understanding how to bundle
To design a bundle you want to find products and services that …
Are worth more together than they are separately
Have a well defined value-based market segment at which the bundle can be targeted
Can be priced together
The last point is worth unfolding. One sometimes finds combinations of products with very different pricing metrics. One product might be priced per location, another per user. Building bundles from products with incompatible pricing metrics can be a real challenge. When companies have a product portfolio, it is worth taking a step back and look at all of the different pricing metrics and figuring out how one would combine them in bundles. If the bundle pricing gets too complicated it can defeat the main purpose of bundling, which is to make it easier for buyers to purchase products that are used together.
My favourite bundle
I am a collector of films and videos. That is my segment. I buy, trade, sell videos That is my value segment.
When I think of a perfect bundling example from an online retailer, I am reminded of the cult film preservation and releasing company, Vinegar Syndrome. They offer a once-a-year opportunity for their followers to purchase the VS Subscription for a flat price, which then includes every release (minus several titles from a separate partner label). You’re paying a lump sum to get a collection of movies that appeal to a certain market segment. By committing to the bundle you are getting access to a wide range of movies at a great price.
Yes, it may be a hefty price to pay at the time. But in the end, you’ve saved hundreds of dollars and the plus side of all of this is, if you don’t enjoy or like any of those movies, you can easily just sell them on and get your money back. Everyone wins. Many of these titles will go out of print (OOP) over time, improving the chance of selling selling on an OOP title. Collector’s and film enthusiasts will shell out hard earned cash for those now hard to get titles so buying the bundle can be a good investment!
More reading for you
Core Concepts for Pricing and Customer Value Management
Bundling (this post)
Coming soon …
Community Value Driver
Connecting Value and Pricing Models
Cross Price Elasticity
Customer Value Journey
Customer Value Management
Economic Value Driver
Interactions of Cross Price Elasticity and Price Elasticity of Demand
Package Design
Pocket Price Waterfall
Price Elasticity of Demand
Pricing Design
Pricing Model
Value Based Market Segmentation
Value Ratio
Value to Customer (V2C)