Price bundling for publishers
Price bundling – the art of selling more products to a customer by linking savings to volume of products purchased – is commonly used across industries. In the publishing world, we often see “3 for 2” offers in the bookshops but are there alternatives and how does price bundling work?
The different models available include:
- Mixed joint bundle – buying a number of products and achieving an overall saving (e.g. save 20% if you buy all three books)
- Mixed leader bundle – buying one book lets you save money on another (e.g. pay £20 for an English dictionary and save £10 when you also buy a thesaurus (normal price £20))
- Tie- in bundles – used more in the IT market but could have relevance in the e-book market. Here a customer buys a product (e.g. an e-reader) and is then entitled to save money on a range of e-reader products (e.g. a leather carrying pouch) provided they purchase at the same time.
Depending on the model chosen, the benefits of price bundling are many:
- It establishes different price points for different books and takes the consumer away from price bands and generic pricing
- It encourages people into a buying frame whereby in the past they might not have bought a more expensive book on account of its price
- It enables publishers to continue to pitch high price books/publications at a high price while offering a bundled price which appears to give money off the lower priced books.
- It enables publishers to encourage sales of items in lines where sales may be dipping
- It creates “customer warmth” towards the publisher by offering complementary reading at a lower perceived price
- It enables publishers to flex price elasticity muscles on underperforming products in order to reinforce price rigidity on stronger high-value products
However, the bundling model itself creates psychological factors in the consumer’s head and it is important to understand how your customers think. For example, if one book is £90 and another is £20, an offer of saving £10 in the bundle equates to a range of perceptions (the range given is only to show some perceptions and is not a suggestion of the right price approach):
- An overall saving of 10%
- A saving of £5 on the £90 book (5.5% – big deal!) and £5 on the £20 book (25%)
- A saving of £10 (50%) on the smaller book and nothing on the larger
- A saving of £10 (11%) on the larger book and nothing on the smaller
As can be seen, it’s a matter of pitch and it can be seen that the same offer (in terms of what the publisher gets back) is not the same offer in terms of what the customer views and feels. Some research has shown, for example, that bundles below a perceived 20% saving are often ineffective – so the publisher needs to be very careful in managing margin if the bundling exercise is to be effective.
The question for publishers – and this is seen a lot – is how to undertake price bundling without being seen as a “pile ’em high, sell ’em cheap” operation (with consequent impact on brand equity). A bundling approach, like any form of even slightly sophisticated marketing, depends on data sets. So a bundling strategy will require publishers to:
- Define the products to be bundled
- Identify market segments
- Define the objectives of the campaign in terms of each segment (including an understanding of who buys what and who doesn’t)
- Hone the bundle model to perceived values in target market sector
- Model the profitability based on a range of outcomes against strategic needs
- Run campaign and implement feedback and control mechanisms
Bundling is not a new game in publishing but today it offers one more tool in the armoury of publishers who are keen to drive pricing and branding strategies to encourage consumer loyalty. But as with any marketing method, it may work and it may not. One thing I have learned over the years is that customers tell you most how your marketing works and sometimes (as shown in the famous Hoover promotion all those years ago), they are a dab hand at spotting a super deal.
So never be afraid to drop a campaign if you suddenly realise it’s not working for you. Bundling, like any marketing method, is a tactic to deliver profitable results. Always be prepared to learn from your mistakes to deliver more effective operations in the future.