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Bundling

Reviewed by Komal | Updated on Sep 30, 2020

Catalogue

What is Bundling?

Bundling is when companies pack their different products or services together as a single combined component, perhaps at a lower price than customers would be charged separately to purchase each item.

This marketing campaign promotes the easy purchasing of more than one company's products and/or services. Usually, the products and services are linked, but they may also consist of different items that appeal to one group of customers.

Understanding Bundling

Most companies manufacture and supply products or services. They will determine, at a "bundle price", whether to market products or services individually at individual prices or in product packages/bundles.

In many verticals, such as banking, insurance, software, and automobile, price bundling plays an extremely important role. Indeed, some organisations come up with whole marketing strategies based on bundling.

Companies sell the product in a bundle pricing scheme for a lower price than would be paid separately for products. Giving discounts will stimulate demand, allowing companies to sell products or services they would otherwise have had difficulty unloading, and produce a greater volume of sales.

Types of Bundling

Bundling usually means giving customers the option of buying a set of products together as a package at a lower price than they would pay to buy them all individually, in a process known as mixed bundling.

An alternate, more rare form of this technique called pure bundling also exists. Pure bundling does not give customers the option of purchasing items separately. An object consisting of several products or services must be purchased as one unit, or not at all.

Exceptions to Bundling

Unfortunately, as needs arise, many consumers, particularly younger people, do not reap the benefits of bundling as they prefer to purchase various items a la carte. For instance, young people who get their first car insurance policy often go to the agent their parents' contact and just stick with that cover for years.

Later in life, they often use another insurer near to their new residence as they purchase their first properties. This is a mistake done by the majority of consumers that will cost them.

The reality is insurance companies have tremendous incentives to provide to each customer with more than one insurance policy as acquiring a new customer can cost at least six times more than retaining an existing one. Insurers thus have a clear incentive to sell their car insurance customers a home or life insurance policy, or vice versa.

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