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What Is Product Bundling?

A local lawn maintenance company might bundle services like lawn mowing, shurb trimming and landscaping.
Product bundling usually includes cable TV.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 17 August 2014
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Product bundling is the process of securing two or more necessary goods or services from a single vendor. This strategy usually provides several advantages, including saving a great deal of money. Long a practice among businesses, the concept of product bundling has expanded to include residential customers over the last twenty years, especially in regard to various types of communication services.

The basic nature of product bundling involves the willingness of a supplier or vendor to provide two or more services to a customer for basic rate. This rate normally provides significant savings over purchasing the products individually. For example, a communications company may choose to offer a cable TV bundle that allows the subscriber to enjoy cable television, local telephone service, and Internet access as a single product offering, rather than having to purchase three different services at a cumulative higher rate.

Along with saving money, product bundling also provides other benefits for the customer. One has to do with sheer convenience. Rather than having to deal with multiple vendors in order to have access to multiple products, the customer has one central vendor for all his or her needs. This concept of one-stop shopping means the client spends less time keeping up with payments to various vendors, and has one central pipeline when there is a need for customer support or if there is a question about one of the services.

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Vendors also benefit from providing various types of bundled packages to their clients. In many cases, the cost and convenience created by product bundling go a long way toward promoting customer loyalty. This makes the client less likely to switch to another vendor for any of the services, especially if the price for the bundle is competitive. Product bundling also simplifies the billing process for the vendor, since all services and products are usually billed on one monthly invoice, rather than several different ones.

Product bundling is also a common strategy with software products. For example, office suites offered by different manufacturers will normally include a data processing program, a spreadsheet program, an email client, and presentation creation software, all in one package. This makes it much easier for customers, since they can purchase all these software options as part of one package, rather than paying for them individually. Depending on which software manufacturer is involved, the savings can be substantial.

The idea of product bundling is also used in other ways. For example, a local business that mows lawns as its main service many offer customers a bundled package that also includes shrub trimming and basic landscaping, for a small additional fee. Often, this is less expensive to the customer than purchasing the different services separately. Even businesses like delicatessens can use this basic approach of product bundling, such as offering an entrée along with two or three sides for a single price that is lower than buying the items separately.

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anon300077
Post 6

Is the audio industry an example of product bundling?

comfyshoes
Post 5

Crispety- I think that is a great idea if you can do it. I live in Florida and many companies that will write auto insurance policies will not write homeowner’s insurance policies.

For example, State Farm no longer offers homeowner’s insurance in the state of Florida even though we have not had a hurricane in the last five years. Here insurance bundling is really not possible.

Crispety
Post 4

Cafe41 -I agree with that. I hate having accounts everywhere. I also wanted to say that insurance bundling is also very popular.

Most insurance companies will combine your auto insurance policy with your home owner’s insurance and may even add your liability insurance for your business as well.

The more policies a customer has with an insurance carrier the lower their overall insurance costs are. In fact over 65% of Americans combine their homeowners and auto insurance policies together in order to receive reduced rates.

cafe41
Post 3

Sunny27 -I know what you mean. At HSBC, the Premier customers who are considered their best customers that have a balance exceeding $100,000.

These customers get preferred rates on mortgages, CD, and even get assistance in purchasing an overseas property as well as concierge services overseas.

I know that companies bundle products so that consumers feel that they are getting more for their money and will be more likely to stay with the company because it is so convenient.

This is why HSBC and other banks also offer investment services to their high end clientele. They want to make sure that customers will find all of their financial needs at the bank and not go elsewhere. This adds convenience to the customer and builds loyalty as well.

Sunny27
Post 2

Anon87731- I think I can answer your question. Banks use product bundling in various ways. They will often provide a free savings account with the opening of a checking account with qualifying deposits.

They will also offer a customer benefits package that may include a lower rate on mortgages or higher rates on CD’s if your account is maintained at a certain balance.

In addition, they may offer free cashier’s checks and traveler’s checks in addition to overdraft protection for opening an account with a certain balance.

Banks really try to offer their customers value added benefits and often bundle packages by offering you various types of accounts. The higher the initial balances are the more they offer you in terms of benefits.

anon87731
Post 1

How is product bundling advantageous to banks?

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