What Is a Bundle Pricing Strategy and Who Can Use It?

By Indeed Editorial Team

Published July 21, 2021

Businesses may use a variety of pricing strategies to increase customer satisfaction and profit margins simultaneously. Bundle pricing allows companies to sell multiple items for one flat price, which may be appealing to certain consumers. Understanding how bundle pricing works can help you decide whether to implement this strategy within your system of business operations. In this article, we define what bundle pricing is, review the different types, identify who uses this business strategy and discuss the advantages and disadvantages of using it.

Related: How To Negotiate Product Prices With Customers

What is bundle pricing?

Bundle pricing is a business strategy where companies group several products together into a bundle and sell them at a single price, rather than attribute individual prices to each item. This means that a bundle is now an individual product. Businesses may also apply this pricing strategy to a variety of services in addition to items and products. Bundle pricing can benefit a company because it can display more value for the products overall.

Bundle pricing focuses on the idea of consumer surplus and the notion that customers typically have a predetermined price that they're willing to pay for an item. Consumer surplus is the difference between the price that the customer is willing to pay and the amount that a business charges for a product. If they spend less than their predetermined budget, the consumer is likely to believe they received a good deal. Bundle pricing may help capture a greater amount of consumer surplus while still offering the customer a discount.

Related: 29 Pricing Psychology Strategies (With Examples)

Types of bundle pricing strategies

There are two primary strategies for bundle pricing: pure bundling and mixed bundling. While businesses can use either to pursue the same objectives, they have different features and benefits.

Pure bundling

Pure bundling is a pricing strategy where businesses sell particular items exclusively with one another. In some cases, certain items may not be available for purchase individually and only exist within a bundle. This means that if a consumer is interested in one item or service within the bundle, it may motivate them to purchase the entire thing, thus increasing profits for your company. There are three distinct subcategories of pure bundling, which include leader bundling, joint bundling and mixed-leader bundling.

  • Leader bundling: Leader bundling is when you include a leader product, or primary product, alongside other non-leader products of lesser value or popularity within the same bundle. This means that the leader product may be what influences consumers to purchase the entire bundle.

  • Joint bundling: Joint bundling is when you decide to offer two items together as a bundle.

  • Mixed-leader bundling: Mixed leader bundling is similar to leader bundling because it includes one leader product in addition to other non-leader products. It differs because mixed-leader bundling also allows the consumer to purchase the leader item individually.

Mixed bundling

Mixed bundling, or custom bundling, occurs when you offer customers the option to purchase a bundle and the option to purchase the items individually. With mixed bundling, you may incentivize purchasing the bundle by offering it for a lesser price than the total of all the items when sold individually. This allows some customers to receive a discount on certain items, while others can pay full price if they decide not to purchase all of the items.

Related: Markup Pricing: Definition and How To Use It

Who uses bundle pricing?

Businesses in various industries use bundle pricing in order to increase their value while increasing customer satisfaction as well. Companies and businesses that may use bundle pricing are:

Restaurants

Bundle pricing can be useful for restaurants and fast-food chains because it allows them to create bundles of food items that complement each other, which can encourage the customer to purchase an entire meal, rather than a single item. This can increase the amount of money the customer spends and their overall satisfaction with the company. Because most food items have an expiration date, bundle pricing can also help restaurant owners offer discounts to potentially increase the number of customers that purchase that item.

For example, if a hamburger restaurant purchases an excess amount of potatoes and they risk losing profit because of product expiration, they may incorporate potatoes products like fries and hash browns into a bundle with a leader product like a hamburger. This way, customers who enter the restaurant intending to purchase a hamburger may select the bundle instead, thus increasing the number of potato product sales.

Internet and cable companies

Internet and cable companies are another industry that can benefit from using a bundle pricing strategy. They may offer their customers several options for channel preferences, all of which have different price points and values. However, if a customer desires a particular channel or set of channels and they're unable to purchase them individually, they may decide to spend an additional amount and purchase the entire bundle. This means that the customer has access to their favorite channels, and the cable company increases their profit.

Alternatively, they may provide a bundle with a leading popular channel and several lesser-known channels in order to give their customers access and exposure to these alternatives. If the consumer discovers that they like one or more of the less popular channels, this may add value to the entire bundle and company overall.

Retail stores

Retail stores may also decide to use the bundle pricing strategy in order to increase their revenue and help consumers feel like they received a great deal. A retailer may decide to include a popular and higher-priced item, such as a camera, in a bundle with lesser value items to complement it, like a camera strap, a roll of film or a memory card.

This strategy can motivate the consumer to purchase the bundle and acquire all the necessary items together while also saving money. Bundle pricing can allow the retailer to sell more items at a higher margin while simultaneously providing the customer with a discount.

Related: Costs of Goods Sold: Definition, Uses and How To Calculate

Advantages and disadvantages of this strategy

Bundle pricing can yield several benefits, although it may be beneficial to compare the advantages and disadvantages before implementing this pricing strategy. Understanding the pros and cons can help you decide whether this is the right approach for you. The advantages and disadvantages of bundle pricing include:

Advantages of bundle pricing

There are many benefits to implementing a bundle pricing strategy, including:

  • Introduces new products: If you identify a product that is popular among consumers, you may decide to include it in a leader bundle along with a product you're trying to introduce. This allows you to use consumer interest in one particular item as an opportunity to showcase other items and potentially interest your customers in those items as well.

  • Attracts a new kind of buyer: While your products may attract particular types of consumers, bundle pricing can attract buyers looking for deals and discounts or buyers who hope to find items that complement each other. New types of buyers can increase your overall popularity among consumers and increase your profits.

  • Increases customer spending: A bundle could motivate a customer to spend more money than they planned because you may not offer the items individually. Even if you sell bundle items separately, the bundle may allow the customer to purchase them at a lower price than it would be to purchase all the items individually.

  • Decreases marketing costs: Rather than allocating finances to market each item individually, you can advertise two or more products or services with bundle pricing and use the same amount of resources as you would when advertising a single item. This means that you can decrease your marketing costs while also selling more products.

  • Simplifies production and reduces the likelihood of error: If a bundle includes three separate items, it may reduce the likelihood of error because one may occur during the delivery of each of the three items individually, rather than a single opportunity for error when selling them as a bundle. This can also simplify the experience of purchasing your product.

  • Personalizes pricing: Many consumers might prefer to feel as though the pricing of items they purchase is customizable and in their control. Some bundle pricing strategies allow for customizable bundles in which the consumer chooses which goods or services to include, meaning that customers may decide to frequent a store or business more often if it offers this option.

  • Clears idle or excess stock: Bundles offer you a great opportunity to try to clear out stock or sell a higher number of excess items. If there was a purchasing error or a product did not sell as rapidly as predicted, consider combining them with higher ticket items or goods and services that are consistently popular.

Disadvantages of bundle pricing

While there are many benefits to bundle pricing, this strategy has a few disadvantages as well. Some potential disadvantages of bundle pricing are:

  • Causes a barrier to entry: One risk of bundle pricing is that some customers may only decide to purchase items individually because they feel that bundle pricing is not an added benefit to them. This means that bundle pricing can produce a barrier to entry because customers may decide to purchase the item individually elsewhere.

  • Lowers profits for particular products: If you offer a product for a discounted price as a part of a bundle and you sell the item individually, you may lower your profits if customers purchase more of that item at the reduced bundle price. This means it's important to carefully select which products complement each other and minimize the risk of profit loss.

  • Impacts perception of the products and company: While not always the case, some customers may consider items within a bundle to be of lesser value because they assume the retailer is intentionally bundling these items to get rid of old or surplus goods. One way to combat this is to invest in marketing techniques that highlight their features and value.

  • Results in unwanted or unused products: While bundle pricing can be a great opportunity to introduce a new product to your consumers, if the product is unpopular, they may feel as if they are spending money on a product they no longer want or won't use. This could potentially impact customer satisfaction.

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