Wednesday, March 3, 2010

Product Bundle Pricing

The textbook defines product bundle pricing as “combining several products and offering the bundle at a reduced price” (274). This strategy can be effective at selling product accessories that customers would not buy outside the bundle. This can increase the total profit gained from each customer even if the profit margin on each item sold in the bundle is lower than if they had been sold separately.

Walmart provides an excellent example of product bundle pricing with the way they sell video game consoles. The company’s “Xbox 360 Super Elite 250GB Bundle,” for example, includes an Xbox 360 console, Final Fantasy XIII, an Xbox 360 250GB hard drive, 2 Xbox 360 wireless controllers, an Xbox 360 wired headset, an Ethernet cable, a standard definition Xbox 360 composite A/V/ cable, and a Final Fantasy face plate. This package sells at a price of $399. This saves the customer roughly $35 compared to if these items were purchased individually.

Walment knows that a customer buying an Xbox 360 is likely going to want at least some of the other items included in this bundle at some point in the future. By selling all of the items together in one package, Walmart ensures that they receive some profit from selling each of these items rather than allowing the customer to purchase the extra controller or Final Fantasy XIII from Bestbuy or Gamestop at a later date. This bundling also provides added value to customers who save time and money by buying all of these items at once.

Scott Hardy, Section E

No comments:

Post a Comment