Bundling / Definition / Unbundling

Getting The Definitions Right

This is an attempt to get a more precise definition of  Bundling and Unbundling.  To add to the definition mix, there are different two kinds of bundling, Product and Price Bundling. The definitions here are based on “Strategic Bundling of Products and Services” by Stefan Stremersch & Gerard J. Tellis. The definitions are lifted verbatim from their work.

Bundling: Bundling is the sale of two or more separate products in one package.
                  Examples: Opera season tickets, multimedia PC
Price bundling: Price bundling is the sale of two or more separate products as a package at a discount,    without any integration of the products.
                 Examples: Luggage sets, variety pack of cereals
Product bundling: Product bundling is the integration and sale of two or more separate products at any price.
                 Examples: Multimedia PC, sound system
Pure bundling: Pure bundling is a strategy in which a firm sells only the bundle and not (all) the products separately.
                 Examples:Apple Computers (Cannot buy it without the software but you can buy its OS X separately)
Mixed bundling: Mixed bundling is a strategy in which a firm sells both the bundle and (all) the products separately.
                 Examples: Telecom bundles

So what is Unbundling? The literature definition is, “selling all products separately and never as a bundle”.  I define unbundling as
a deliberate pricing strategy to separate  truly optional components in a product/service and price these individually giving customers the option to buy or not

The key word is “optional”. If a component is essential for for the customer to achieve their primary goal then it is unbundling even if priced separately.

Unbundled pricing is a la carte pricing, except that products were always marketed and viewed as a one monolith and not as a bundle of components. For example, until now Airlines never separated out or itemized in-flight meals, baggage service etc. An airline customer never considered they were purchasing a bundle.  What is happening now is unbundling the seemingly monolithic components into their sub-parts and pricing them separately.

2 thoughts on “Getting The Definitions Right

  1. Pingback: In the Spirit of Airline Unbundling « Iterative Path

  2. Pingback: Unbundling – Charging for What Used to be Included in the Whole | Iterative Path

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