Bundling

What is 'Bundling'

Bundling is a marketing strategy that joins products or services together in order to sell them as a single combined unit. Bundling allows the convenient purchase of several products and/or services from one company. The products and services are usually related, but they can also consist of dissimilar products which appeal to one group of customers.

BREAKING DOWN 'Bundling'

Many companies are multi-product or multi-service companies that must decide whether to sell products or services separately at individual prices or in packages of products, or bundles, at a "bundle price." Price bundling plays an increasingly important role in many verticals (e.g. banking, insurance, software, automotive) and some organizations devise entire marketing strategies based on bundling. In a bundle pricing scheme, companies sell the bundle for a lower price than would be charged for items individually. Bundle pricing strategies help companies increase profit by giving customers an opportunity to buy everything they need for a discount. It also helps the companies attract greater volume in sales, which might help cancel out sacrifices in per-item profit margins.

Not all providers will mention bundling as an option to their customers; therefore, it is important to check whether bundling is a possibility. Bundled services will often save consumers money.

For example, if you have two insurance policies (home and auto) through two separate companies, you might be able to bundle both policies together using only one company and reduce the total monthly payments. Bundling can also be used to switch several payments into one, making bill payments easier, even if it doesn't save money.

Why Bundling is a Consumer Friendly Practice

Bundling is almost always good for consumers. Unfortunately, many consumers, especially younger people, won't take advantage of bundling policies because they buy different policies a la carte as needs arise. For example, young people getting their first car insurance policy often go to their parents’ agent and just stick with that coverage for years. Later in life, when they buy their first homes, they will often use a different insurer closer to their new residence. For the majority of consumers, this is a mistake that will cost them. The truth is, insurance companies have significant motivation to provide more than one insurance policy to each customer. This is so because it can be at least six times more expensive to acquire a new customer than it is to keep an existing one. Thus, insurers have a strong incentive to sell a home or life insurance policy to their car insurance customers or vice versa.