What You Need to Know About Price Bundling Strategy

Price bundling is a pricing strategy where companies including towing service leesburg va package separate products or services together then offer them at a single, and typically reduced price. Bundle pricing is essentially common across different industries, especially those in retail. It involves having multiple products offered as a package at a price that is lower than the sum of purchasing each item individually. Take an example where when you want Microsoft Products, instead of getting PowerPoint along, you get a full office that comes with other applications such as Excel, Outlook, Word, among others, all included in a one-time purchase.

A bundle pricing strategy will normally fall into two categories, which are pure price bundling and mixed price bundling. Let’s have a look at each of these two;

Pure price bundling

This is a strategy where the seller only offers specific products as part of the bundle. Else, the products that compose a bundle lean on one another to such a point that they have to be sold as a bundle. In many cases, this bundling option applies to products that are tethered in terms of quality. An example is how a video game console typically comes with one or more controllers when purchased for the first time. In this case, you can’t use one product without the other. It makes no sense at all to sell the system without giving customers the ability to use it.

Mixed Price Bundling

Mixed price bundling is a practice where a business offers items both individually and within a bundle at a reduced price. Generally, the items that compose a bundle can still stand on their own. These products would still be useful without the support of any other product, but often complement or enhance the other items they are bundled together with. Mixed priced bundling has a prominent presence in fast food industries through value meals. You would find a different form of bundles especially in fast foods, where you get an offer when you buy all meals together.

Before you can implement a price bundling strategy, it is important you weigh on the pros and cons of the same, and put your prices in such a way to avoid losses.

Price bundling comes with its share of cons. It presents a unique opportunity for companies to offload some of their less popular products. It can be quite challenging for businesses to sell some of their less favorite products not unless they introduce a bundle. A well-executed price bundling strategy can help businesses unload any kind of inventory as well as offloading any product that is slow to move.

There should be some cons as well. There is cannibalization of products contained within the bundle. In some instances, the profit margin for one of the products in the bundle might be significantly larger when brought individually. Additionally, if a store doesn’t accurately anticipate the popularity of the bundle, it might see an influx of customers, leading to little revenue or in some cases losses.