The document discusses different types of bundling practices including pure bundling, mixed bundling, and leader bundling. Pure bundling only allows products to be purchased together as a bundle, while mixed bundling allows individual or bundled purchase. Bundling can benefit retailers by increasing sales and customers by providing convenience and perceived value or savings. However, bundling may not work if it adds too much cognitive load or mixes high and low priced items. When using bundles, it is important to understand customer behaviors and choose the appropriate pricing strategy.

1. Bundling practices

2. Bundling...
• It involves offering several different products for sale as one combined
product like "combos" or value meals at fast food restaurants (where a
combination might include a burger, a drink and a beverage) or the
concession stand at a movie theater (where it might include popcorn, soda
and candy).
• Bundles are also common from cable companies (their bundles include the
basic service, hardware like the cable box, access to specific features like
packages of movies, sports and other specialty programming, etc).
• It is a popular practice that can increase revenue for the seller (by increasing
sales) and provide increased satisfaction for the customer (who enjoy any
savings and the convenience that comes with having to evaluate a single
price).

3. Product bundling
• A technique in which several products are grouped together and sold
as a single unit for one price.
• This strategy is used to encourage customers to buy more products.
• McDonald’s Happy Meals are an example of product bundles.
Instead of selling a burger, soda, and French fries separately, they are
sold as a combination, which leads to more sales than offering them
separately.

4. Bundling vs. Unbundling
Bundling: when a company has gained monopoly power it will use
bundling to make consumers get its whole set of products and lock
them, by levering on their existing distribution networks (Microsoft
Windows is an example).
Unbundling: a business process where a series of products or blocks
inside a value chain are broken down to provide better value by
removing the parts of the value chain that are less valuable to
consumers and keep those that in a period in time consumers value the
most. (think of how Amazon unbundled retail stores by designing in a
whole new experience, that leveraged on digital real estates).

7. Types of Product Bundling

8. Pure Bundling...
• Where the individual components that make up the bundle are only
available when purchased as a bundle – they are not available for
purchase separately.
• Example would be the cable company – you can choose different
bundles of services and channels, but you can't select the individual
channels that make up those bundles.
• Pure bundling is sometimes favored because it is seen as a way to
increase sales – to get the channel you really want you also have to pay
for a lot of channels you really don't care about.
• Because pure bundling also limits the choices available to the
consumer it can come under scrutiny and even be subject to litigation.

9. Mixed Bundling...
• where the individual components that make up the bundle
are also available for purchase individually.
• Movie theater snacks and fast food combos are examples of
mixed bundling – you can purchase each item individually, or
together as part of the combo for a single price.

11. Pure Bundling: There are products that are meant to be
bought as a package. In other words, this is a “take it or leave it”
situation. The customer isn’t left with the option to choose if he
wants to buy all the products separately or together. Buying
them all together is the only option.

12. Leader Bundling: This
strategy is used when the
leading product is losing its
position. Thus, the leading
product is on discount only
if the customer buys it with
the non-leading one.
Joint Bundling: Two
products are offered jointly
for a special reduced price.

13. Mixed Bundling It does not give customers the ability to dictate what products /
services belong in the bundle. However, unlike pure bundling, they do have the
option of purchasing each product / service together (at a lower price) or
individually (at a higher price). The Value Meal at McDonald’s is a great example
of mixed bundling. You can purchase the sandwich, fries, and soda individually, or
in a discounted bundle.

14. • Pure bundling and mixed bundling are both examples of product
bundling. The difference is that mixed bundling allows the consumer
to purchase the items separately while pure bundling does not.
• Bundling offers a very powerful way to increase sales and also
customer satisfaction.
• Although unbundling has become very popular, especially in things
like flower delivery where perceived cost can be reduced with
separate service fees and delivery charges, there are many customers
that prefer the convenience that comes with bundled pricing.

15. • Watch the customers at a movie theater, where the bundled packages offer little
if any savings (almost always less than 5%).
• Customers love the bundles because there is less thinking (they don't need to add
up the prices in their heads) and greater perceived value (they assume savings
even when they aren't there).
• More specifically mixed bundling is better as it allows your customers more
options, when they want them, something they appreciate rather than the Pure
bundling can effectively force them to spend more money, but does anyone really
like dealing with the cable company?
• Unless there are very few alternatives for your customers pure bundling is
generally a dangerous game.
• But mixed bundling offers the best of both worlds. Customers are not trapped,
they have the ability to choose each individual item and you are not limiting their
options. At the same time you are offering them the convenience of a bundle of
products at a single price.

18. How bundle pricing benefits retailers?

19. How bundle pricing benefits customers?
• Pain of payment: When pricing is more opaque, the customers are less able to
identify the “right” and “wrong” price.
• They are not completely able to differentiate which segment of the products
combined in the bundle pricing cost respectively. They feel less anxious about
making the wrong decision.
• Lets say when you are buying a car, you are only aware of the full price, but
not of the price of every feature respectively. So, you don’t even think about
how much is the sound system, and how much cost the interior design.
• You don’t make yourself think that you’re maybe overpaying for something.
• Online Moves: when deciding to buy something, most of the consumers
first get informed online about the offer of different retailers, so you use
bundle pricing and provide them a better offer, you will be the one who will
get the customer.

20. When bundle pricing doesn’t work?
• The presenter’s paradox means that you could be wrong when assuming that
bundling products will end up in more sales. “Much like adding warm water to hot
leads to a more moderate temperature, attempts to clinch a deal by adding extra
features to an already strong proposal, could mean a reduction in the overall
attractiveness of that proposal.
• Categorical reasoning: Often, each additional feature or piece of information
provided serves to cheapen the overall package”, why? People tend to define products
or services as expensive or inexpensive and their judgment of the product value is often
based on the price.
• If you bundle an expensive product whit an inexpensive one, it decreases value, and
people are less likely to buy it.
• Cognitive load: This term refers to the fact that bundle pricing is of no use if it is too
complicated for the buyer to understand. So, if the customers think that they need to
put much effort into understanding what the offer is actually about, they tend to
abandon the buying process.

21. What is important when performing bundle pricing?
1. Know your audience-What they buy, how and when--are they an
impulsive buyer, and if they are, then how frequently, How much do
they spend, are there any products or services that could encourage
them to buy even more, etc.
2. Pricing strategy: Besides knowing what types of bundle pricing
exist, it is even more important to be aware of what pricing strategy
is the most suitable for your business.