Product Bundling
A bundle of products is sometimes referred
to as a package deal. Product bundling is a marketing strategy that
involves offering several products for sale as one combined product.
This strategy is very common in the software business (for example:
bundle a word processor, a spreadsheet, and a database into a single
office suite), and in the fast food industry in which multiple items
are combined into a complete meal.
The strategy is most successful when:
 there
are economies of scale in production,
there
are economies of scope in distribution,
marginal
costs of bundling are low.
production
set-up costs are high,
customer
acquisition costs are high.
consumers
appreciate the resulting simplification of the purchase decision and
benefit from the joint performance of the combined product.
Product bundling is most
suitable for high volume and high margin products. Product bundling
can be seen as an unfair use of market power because it limits the choices
available to the consumer. In these cases it is typically called product
tying.
Pure Product bundling occurs
when a consumer can only purchase the entire bundle or nothing, mixed
bundling occurs when consumers are offered a choice between the purchasing
the entire bundle or one of the separate parts of the bundle.
Pure bundling can be further
divided into two cases: in joint bundling, the two products are offered
together for one bundled price, and, in leader bundling, a leader product
is offered for discount if purchased with a non-leader product. Mixed-leader
bundling is a variant of leader bundling with the added possibility
of buying the leader product on its own.
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