Bundling & Unbundling

Product bundling is the practice of combining two or more products and offering them as a package at a single price as a "package deal" or "combo". It is seen at fast food restaurants, movie theaters and many other places.

Unbundling is the opposite - taking the different components of what was (even if it wasn't really apparent) a package deal and breaking out the different components and charging for them separately.

For example a florist that offers free local or wire delivery is really practicing bundling. The cost of delivery (and potentially an outgoing wire service charge) is, hopefully, built into the price of the flowers meaning they are being priced as a bundle.

As the cost of providing delivery has risen many florists have started unbundling - charging separate service and delivery fees. This can, in many situations, be the correct approach. It effectively lowers the price of the core item, the flowers, meaning less chance of "sticker shock", and the additional fees are introduced later in the sale process once the customer has largely committed to the purchase. It also helps the customer understand what they are paying for - they are less likely to feel they are being overcharged on the flowers if unbundling shows them that the cost of the delivery is $20.

But no one approach is right for every situation or customer. Product bundling has a very powerful appeal which is why the technique is employed so often - it works!

Bundling often implies some kind of savings but sophisticated retailers have learned through experience that meaningful discounting isn't essential - the lure of the bundle is enough. The savings on movie theater concession bundles are typically 2% - hardly enough to get any interested but it doesn't matter - it is the bundle itself that is the attraction.

Neither approach should be a religion. The goal is to have a profitable pricing strategy that appeals to as many customers as possible and both bundling and unbundling contribute to that.

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