Bundles with sharp teeth: effective product combinations

Purpose – More than ever, businesses need to assemble and offer multiple products combined into a single offer, a practice known as bundling. The purpose of this paper is to describe how to bundle effectively through analyzing the value of bundle components and the specialized market purpose of a bundle. Design/methodology/approach – In working with many different clients, statistical techniques have helped us draw an interesting conclusion: most bundles—though not all—share a similar structure or taxonomy. At the heart lies the core or anchor element; this is the product or service driving the inquiry. Wrapped around that are those elements which strongly complement the core. The next layer up consists of products or services seen as convenient for the core, but may not always be cost‐effective to include. The final layer of a bundle often turns out to be additions with negative value. These are either substitutes for other bundle components (buyers generally hate being forced to buy two redundant products), or components which have such low relevance to the core that they clutter the value message. Findings – This article examines two dangers to effective bundling: mismatching the various elements of a bundle, and mispricing the offer. We find there are four marketing mistakes which typically stem from mismatches and mispricing: failing to create bundles for special purposes; making bundles too big; using tiering instead of bundles; and failing to innovate on bundle definition. Originality/value – There is a science to bundles, but it is not widely known or practiced. This science grows in importance as bundling becomes more important, and bundle components become more diverse. Today most bundling is done through judgement and ad hoc initiatives. Frequently such an approach fails to develop an effective bundle, or effectively communicate the value of the bundle. Understanding the taxonomy of a bundle, and the value elements, will allow more diverse and effective product and service combinations.