01/12/2019
The Risk of Bundling
I want to share some really interesting research that has been published so you can apply the findings your business immediately.
It’s called “the risk of bundling.”
Let’s say you’re a yoga studio and each class costs $20. Purchased individually 10 classes would cost $200, but instead you decide to bundle the classes into a package of 10 for only $150.
In the immediate future you’ll make more revenue because the cost savings to a client is enticing, but in the long term, you won’t see repeat business. Why?
Studies have shown that when purchasing experiences or services, customers value the product less when bundled together rather than purchasing them individually. Over the long term, people are less likely to show up for your service/event because the package as has a perceived less value. The package seems disposable.
In products, the same theory applies, for example in the wine market. A single bottle of wine we’ll enjoy slowly, but when we buy a case of wine we’ll consume faster as it seems more expendable.
Depending on what you’re selling and what your objectives are, take note of the “risk of bundling” when pricing your next offer.
See links below for further reading:
http://repository.ust.hk/ir/bitstream/1783.1-1748/1/transaction.pdf
https://www.cmu.edu/dietrich/sds/docs/loewenstein/redblack.pdf
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