Product bundling

In marketing, product bundling is offering several products or services for sale as one combined product or service package. It is a common feature in many imperfectly competitive product and service markets. Industries engaged in the practice include telecommunications services, financial services, health care, information, and consumer electronics. A software bundle might include a word processor, spreadsheet, and presentation program into a single office suite. The cable television industry often bundles many TV and movie channels into a single tier or package. The fast food industry combines separate food items into a "meal deal" or "value meal". A bundle of products may be called a package deal; in recorded music or video games, a compilation or box set; or in publishing, an anthology. Most firms are multi-product or multi-service companies faced with the decision whether to sell products or services separately at individual prices or whether combinations of products should be marketed in the form of "bundles" for which a "bundle price" is asked. Price bundling plays an increasingly important role in many industries (e.g. banking, insurance, software, automotive) and some companies even build their business strategies on bundling. In bundle pricing, companies sell a package or set of goods or services for a lower price than they would charge if the customer bought all of them separately. Pursuing a bundle pricing strategy allows a business to increase its profit by using a discount to induce customers to buy more than they otherwise would have. Bundling is most successful when: There are economies of scale in production. There are economies of scope in distribution. This can be seen in consumer electronics bundles where a big box electronics store offers all of the components for a home theatre setup (DVD player, flatscreen TV, surround sound speakers, receiver, subwoofer) for a lower price than if each component were to be purchased separately.

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