30 October 2021
Price bundling is the practice of packaging-up various price elements that comprise an offer and presenting it as one price.
As the market for a collection of goods or services matures, marketers search for innovative ways to avoid direct comparison of price - bundling occurs late in the product life cycle.
The computer industry is a good example of product lifecycle progression.
An example is the selling of household appliances and electrical goods. Instead of headlining the offer for a flat screen TV as $1,450 - the retailer might choose to make more prominent the bundled finance offer.
ONLY $12.82 per week for 3 years.
Another example is creating product kits - often used to sell cameras.
A typical camera kit might consist of a camera body, standard lens, zoom lens, and camera bag. All offered for one combined price. The total price of the bundle is usually less than buying the individual items. This obviously means the retailer is selling at a reduced margin, however it has the advantage of...
- Increasing the value of the average sale. A consumer may have intended only initially buying the camera but is up-sold to buying the bundle.
- It is an improved discounting method, instead of advertising the camera at a discount, advertising the bundle can be used to initially attract the buyer's interest. If they decide they can't afford the bundle they then feel they are saving money even though they bought only the camera at its full price.
- It's a method of selling slow moving or old stock; bundle the slow moving item with a fast moving item. Using the camera example again, a retailer may have considerable stock of a lens that is less popular (either due to poor initial market positioning, has received mediocre reviews, or the manufacturer has released a new improved lens that covers the same focal length).
Price bundling in the PC industry
Another common example is the bundling of computers (usually desktops, laptops, tablets and even smart phones) which usually come with software preloaded.
Desktops and laptops are sold with the Windows operating system already preloaded and configured. Because this is so common, the average person might not consider this to be a price bundle, however it is possible to buy PC's (particularly servers) with no software at all. For the consumer market, this is rare as many consumers would find loading an operating system very inconvenient or even beyond their capability.
However, in the global server market, the majority of servers use a LINUX operating system variant ("Distro"), often custom installed and configured by an IT technician.
The bundled operating system software (in the case of Windows) is produced by Microsoft and the PC is produced by a variety of other manufacturers (e.g. DELL, HP, Lenovo, ASUS etc.) .
Apple is different because it has its own proprietary purpose built operating system that is neither available separately nor compatible with any other manufacturer's PC.
The relationship between the PC manufacturers and Microsoft is a symbiotic relationship because their business models depend on each other.
Other pricing strategies:
Cost Plus Pricing
Penetration Pricing
Price Skimming
Premium Pricing
Discriminatory Pricing
Yield Pricing
Pricing strategy overview:
Pricing Strategy