Understanding Product Bundling

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Bundling is a concept in retailing, and relates to the inclusion of software in the price of hardware. Bundling occurs frequently on sales of video game consoles and computers; products that in themselves can not be used on any type of software available.

The sales of video game console bundles are often individual video game consoles in the lens packaging, the sale of computers, word processors often in bundles, which would otherwise be purchased separately.

Product bundling is most appropriate for high volume and margin items. Studies carried out by Yannis Bakos and Erik Brynjolfsson established that bundling was especially useful for digital or information products whose marginal cost is close to zero and could allow a merchant with a secondary standard range of goods to force even superior quality goods out of the market place.

There are many examples of packaged goods in the information market, which include collected independent Office Tools (Word, Excel, PowerPoint, Access) in a single package desktop package.

Although many people want to use Word and Excel, and a few of them want PowerPoint and Access. However, when products are bundled in one package, a large number of people spend a fair amount of money for great products.

Software was originally introduced to the PC manufacturers as preloaded. The bundled software has four possibilities, and these are: it comes with independent features that are marketed as one. And includes a single version which comes with limited functionality as the product is sold, or not sold as a product of the original material or trial version of items marketed as a bundle.

Some of the bundle examples include WinDVD – video playback software often bundled with PCs. Tablet – which is bundled with the software – you can write only if you buy a tablet illustration, and video capture software that are bundled software for editing.

The concept of ticket collection known as “twofers”, involves paying the full charge and getting the others free of charge. The tradition of twofers is still applied at the Broadway Theatre in New York. And the same goes for packets, accession related products are common with each other and sold as one unit.

This idea is based on that the cost to serve a customer is zero, and also a large number of people are unlikely to buy one ticket and wish to purchase a package of tickets at the same price.

Bundling enjoys greater success in the presence of economies of scale in production and economies of scope in distribution. Also when marginal costs of bundling are relatively low, production set-up expenses are greater, and client acquisition expenses are high. Customers value the benefits of a simplified purchase decision and take advantage of the power of the combined product.

The basic idea behind the concept of packages is that although consumers have a variety of ideas about the value of single-product, they tend to agree on the value of a package of products offered at a fixed price. In fact, people who buy a package of products are willing to pay more than when buy the products sold separately.

 

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