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Product bundling is a marketing
Marketing

Marketing is defined by the American Marketing Association as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large....
 strategy that involves offering several products
Product (business)

The noun product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce from the Latin produce, lead or bring forth....
 for sale as one combined product. This strategy is very common in the software business (for example: bundle a word processor
Word processor

A word processor is a computer Application software used for the production of any sort of printable material.Word processor may also refer to an obsolete type of stand-alone office machine, popular in the 1970s and 80s, combining the keyboard text-entry and printing functions of an electric typewriter with a dedicated computer for th...
, a spreadsheet
Spreadsheet

A spreadsheet is a computer application that simulates a paper worksheet. It displays multiple cells that together make up a grid consisting of rows and columns, each cell containing either alphanumeric text or numeric values....
, and a database
Database

A database is a structured collection of records or data that is stored in a computer system. The structure is achieved by organizing the data according to a database model....
 into a single office suite
Office suite

In computing, an office suite, sometimes called an office software suite or productivity suite is a collection of programs intended to be used by typical clerical and knowledge workers....
), in the cable television
Cable television

Cable television is a system of providing television to consumers via radio frequency signals transmitted to televisions through fixed optical fibers or coaxial cables as opposed to the over-the-air method used in traditional television broadcasting in which a television antenna is required....
 industry (for example, basic cable in the United States
United States

The United States of America is a Federal government constitutional republic comprising U.S. state and a federal district. The country is situated mostly in central North America, where its Contiguous United States and Washington, D.C., the Capital districts and territories, lie between the Pacific Ocean and Atlantic Oceans, Borders of the U...
 generally offers many channels at one price), and in the fast food
Fast food

File:2008-0614-In-N-Out-burgsfries.jpgFast food is the term given to food that can be prepared and served very quickly. While any meal with low preparation time can be considered to be fast food, typically the term refers to food sold in a restaurant or store with low quality preparation and served to the customer in a packaged form for Tak...
 industry in which multiple items are combined into a complete meal
Value meal

A value meal is a group of menu items at a restaurant offered together at a lower price than they would cost individually. They are common at fast food restaurants....
.






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Encyclopedia


Product bundling is a marketing
Marketing

Marketing is defined by the American Marketing Association as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large....
 strategy that involves offering several products
Product (business)

The noun product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce from the Latin produce, lead or bring forth....
 for sale as one combined product. This strategy is very common in the software business (for example: bundle a word processor
Word processor

A word processor is a computer Application software used for the production of any sort of printable material.Word processor may also refer to an obsolete type of stand-alone office machine, popular in the 1970s and 80s, combining the keyboard text-entry and printing functions of an electric typewriter with a dedicated computer for th...
, a spreadsheet
Spreadsheet

A spreadsheet is a computer application that simulates a paper worksheet. It displays multiple cells that together make up a grid consisting of rows and columns, each cell containing either alphanumeric text or numeric values....
, and a database
Database

A database is a structured collection of records or data that is stored in a computer system. The structure is achieved by organizing the data according to a database model....
 into a single office suite
Office suite

In computing, an office suite, sometimes called an office software suite or productivity suite is a collection of programs intended to be used by typical clerical and knowledge workers....
), in the cable television
Cable television

Cable television is a system of providing television to consumers via radio frequency signals transmitted to televisions through fixed optical fibers or coaxial cables as opposed to the over-the-air method used in traditional television broadcasting in which a television antenna is required....
 industry (for example, basic cable in the United States
United States

The United States of America is a Federal government constitutional republic comprising U.S. state and a federal district. The country is situated mostly in central North America, where its Contiguous United States and Washington, D.C., the Capital districts and territories, lie between the Pacific Ocean and Atlantic Oceans, Borders of the U...
 generally offers many channels at one price), and in the fast food
Fast food

File:2008-0614-In-N-Out-burgsfries.jpgFast food is the term given to food that can be prepared and served very quickly. While any meal with low preparation time can be considered to be fast food, typically the term refers to food sold in a restaurant or store with low quality preparation and served to the customer in a packaged form for Tak...
 industry in which multiple items are combined into a complete meal
Value meal

A value meal is a group of menu items at a restaurant offered together at a lower price than they would cost individually. They are common at fast food restaurants....
. A bundle of products is sometimes referred to as a package deal or a compilation or an anthology.

The strategy is most successful when:
  • there are economies of scale
    Economies of scale

    Economies of scale, in microeconomics, are the cost advantages that a business obtains due to expansion. They are factors that cause a producer?s average cost per unit to fall as output rises....
     in production,
  • there are economies of scope
    Economies of scope

    Economies of scope are conceptually similar to economies of scale. Whereas economies of scale primarily refer to efficiencies associated with supply-side changes, such as increasing or decreasing the scale of production, of a single product type, economies of scope refer to efficiencies primarily associated with demand-side changes, such...
     in distribution,
  • marginal costs of bundling are low.
  • production
    Production, costs, and pricing

    In microeconomics, industrial organization is the field which describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions....
     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 (i.e., low marginal cost) products. Research by Yannis Bakos
Yannis Bakos

Yannis Bakos is a professor at the Leonard N. Stern School of Business at New York University. His primary area of expertise is the economic and business implications of information technology, the Internet, and online media....
 and Erik Brynjolfsson
Erik Brynjolfsson

Erik Brynjolfsson is the Schussel Professor of Management at the MIT Sloan School of Management and the Director of the MIT Center for Digital Business....
 found that bundling was particularly effective for digital "information goods" with close to zero marginal cost, and could enable a bundler with an inferior collection of products to drive even superior quality goods out of the market place.

In oligopolistic
Oligopoly

An oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived from the Greek language for few sell....
 and monopolistic
Monopoly

In economics, a monopoly exists when a specific individual or enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it....
 industries, 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 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.

Bundling in political economy is a type of product bundling in which the product is a candidate in an election who markets his bundle of attributes and positions to the voters.

See also

  • Tying (commerce)
  • Freebie marketing
    Freebie marketing

    Freebie marketing, also known as the razor and blades business model, is the concept of either giving away a sellable item for nothing or charging an extremely low price in order to generate a continual market for another, generally disposable, item....
  • Marketing
    Marketing

    Marketing is defined by the American Marketing Association as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large....
  • Marketing co-operation
    Marketing co-operation

    A marketing co-operation or marketing cooperation is a business alliance of at least two companies on the value chain level of marketing with the objective to tap the full potential of a market by bundling specific competences or resources....
  • Product management
    Product management

    Product management is an organizational lifecycle function within a company dealing with the planning or marketing of a product or products at all stages of the product lifecycle....
  • Package holiday
    Package holiday

    A package holiday or package tour consists of transport and lodging advertised and sold together by a vendor known as a tour operator. Other services may be provided like a rental car, activities or outings during the holiday....
  • Local loop unbundling
    Local loop unbundling

    Local loop unbundling is the regulatory process of allowing multiple telecommunications operators to use connections from the telephone exchange's central office to the customer's premises....
  • Competition law
    Competition law

    Competition law, known in the United States as antitrust law, has three main elements:*prohibiting agreements or practices that restrict free trading and competition between business entities....
  • Compilation album
    Compilation album

    A compilation album is an album featuring tracks from multiple recording artists, often culled from a variety of sources The tracks are usually collected according to a common characteristic, such as popularity, source or subject matter....
  • Multicart
    Multicart

    In video game parlance, a multicart is Cartridge that contains more than one game. Typically, the separate games are available individually for purchase or were previously available individually ...