Unbundled Pricing Cannot Be Lower Than The Monolith

Unbundled pricing should be about exposing revenue opportunities and capturing part of the value created to the customer. The pricing should be such that the sum of the price of unbundled components should be greater than or equal to that of the monolith. Otherwise customers are incented to go with unbundled option and the marketer will end up making less than they did before unbundling.

One exception is that there is value inherent in the monolith that is not available in the unbundled version even if consumers buy all the components. This usually means that the unbundling leaves out a component (physical or logical) that must be provided by the consumer. Since the consumers provide this component they must be compensated for it in the form of a total lower price than the monolith.

Let us walk through an example. A computer system can be sold as one bundle in which case the manufacturer provides the additional value in the form of assembling, system integration, verification and warranty. Or a consumer may buy the parts and assemble this themselves and hence may be able to purchase all the components for a total price that is less than the bundle but will have to do the assembly, integration and verification and must settle for warranty of components.

In true unbundling all components must be unbundled and available to for purchase in a la carte mode to consumers. In the computer example, the manufacturer must sell assembling/integration/verification/warranty as separate components available for purchase.

So for true unbundling, for a marketer to be indifferent to unbundling vs. selling the monolith the sum of the prices of the unbundled components must be greater than or equal to the monolith.

Advertisement