Understanding Bundle Pricing in Company Strategy
Bundle pricing or package pricing is a sales strategy that is often applied in various types of businesses. This strategy can increase sales of a number of products at once and provide profits for your business.
Looking from another point of view, consumers will get a cheaper price than having to buy the products or services in one package separately. This strategy is also often used as a promotional program offered by a brand.
Understanding Bundle Pricing
Bundle pricing is a business strategy carried out by a company by grouping several products into one package and selling them at one price, rather than giving a unit price for each product. It can also be said that the products in bundle pricing become one unified product.
The bundle pricing strategy is not only applied to products, but can also be applied to various services. Determining bundle pricing can benefit the company because it can provide more value for the product as a whole.
Bundle pricing focuses on the idea of consumer surplus and the idea that consumers typically have an educated guess as to the price they are willing to pay. Consumer surplus is the difference in the price consumers are willing to pay and the amount your business charges for a product.
If consumers spend less than their expected amount, consumers are likely to believe they are getting a good deal. Bundle pricing can capture a larger amount of consumer surplus while still offering discounts or discounts to consumers.
Types of Bundle Pricing Strategies
When viewed from a consumer's perspective, the price of bundling a product may seem modest. However, this pricing strategy is also divided into several different types, including the following:
Pure Price Bundling
Pure price bundling is a strategy when a seller only offers certain products as part of a package or the products in the package complement each other's uses so that they are better sold as one unit. In practice, pure price packages or pure price bundling are widely applied to products whose uses are mutually sustainable.
For example, when selling video game consoles, they are usually equipped with one or more controller sticks when purchased directly. You can't use one product without having another. In fact, controller sticks can be purchased separately, but the product will not have comparable value if it is connected and operated together with the video game console.
Mixed Price Bundling
Mixed price bundling or mixed price packages is a strategy used by a business to offer a product either individually or in a package at a cheaper price. Usually the products that form a mixed package can stand alone. These products can be used without the support of other products, but they complement or enhance the value and usefulness of the products in one package.
Mixed price bundling has a quite prominent presence in the fast food industry, namely through value foods. Many fast food franchises offer some form of meal kit deal. You can usually buy main dishes, drinks and side dishes at fast food restaurants at a cheaper price than if you bought the products one by one.
Implementing a bundle pricing strategy is a big decision that can pay off from the time, effort, energy and resources spent. It is important to consider the pros and cons before carrying out the practice of price bundling.
Advantages of Implementing the Bundle Pricing Strategy
Regardless of the pricing strategy that can be applied in your business, of course there are advantages and disadvantages to implementing bundle pricing. The following are some of the benefits gained from bundle pricing practices:
1. Companies can release some of their less popular products
Sometimes it is difficult for a company to sell certain products that are least selling or little known. A well-functioning bundle pricing strategy can help you to offload such inventory or indirectly give consumers the opportunity to try your less prominent products.
2. Consumers may end up spending more than planned
Potential buyers often find the package price attractive. There is a possibility that consumers will buy packages that are more expensive than the individual products they buy. If done correctly, bundle pricing will become its own form of upselling.
3. Attract deal-conscious buyers who may not be interested in the product
Bundle pricing is an agreement with mutually beneficial and attractive arrangements for sellers and potential buyers, arrangements that can attract consumers with a limited budget. Maybe these buyers are not regular consumers, therefore there is an opportunity to encourage transactions, the right bundle pricing will be an attractive strategy.
Disadvantages of the Bundle Pricing Strategy
If you don't properly take into account the targets and objectives of your business, bundle pricing can also be detrimental. Some of the disadvantages of bundle pricing include:
1. Cannibalization of products in the package
In some cases, the profit margin of one of the products in a package may be much greater if purchased separately. If you are not astute in anticipating the popularity of purchasing packages or bundles, you will sell fewer individual items, resulting in a significant loss of profit.
2. Consumers ignore offers if they feel forced to buy
Product selection is the key to successful bundle pricing. Packages need to be created carefully and generally contain products that complement each other's uses. If you bundle irrelevant products, consumers may not be interested in spending more on the package.
The important point of bundle pricing is not to immediately remove goods from the storage warehouse, but to make consumers who previously only wanted to buy individual products change their minds to pay more in order to get other products. These other products will also increase the usability of products that were initially purchased individually.
Bundle pricing can be a strategy for your company to increase sales and profits for the seller and buyer. The use of bundle pricing needs to be done with proper calculations and planning. This is also in line with the scope of the Marketing Pricing Strategy program which you can follow to understand the basic aspects and alternative pricing strategies that must be able to provide optimal profits for the company.
