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Bundling as a customer relationship management strategy / Gopal S. Krishnamurthy.

by Krishnamurthy, Gopal S.

Bundling (Marketing)

Product management

Consumer satisfaction

Customer relations

vii, 77 leaves : ill. ; 29 cm.

Advisor: Dr. Paul Hudec.

Committee members: Gary Shimek, Timothy Charek.

Introduction -- Bundling classification -- Bundling legality -- Economics of bundling -- Bundling as a business strategy -- Bundling as a Customer Relationship Management strategy -- Recommendations and conclusion.

Bundling, pervasive in almost every industry, is widely used as a pricing and promotional strategy throughout the world. Customers experience bundling in various forms, ranging from value meals at fast food restaurants to customized personal computers from Dell. Bundling occurs when one transaction from one service provider results in one price with one bill for two or more products or services.

Volume transactions through bundles create economies of scale, scope, cost, time, and effort for both companies and their customers. They result in significant cost savings for companies and attractive discounts for customers. In addition, customers are attracted by the convenience of conducting their business with just one company. Companies' ability to promote customer satisfaction and customer convenience has increased the consumers' acceptance of bundling; this contradicts critics who see bundling as an anti-competitive and anti-consumerist strategy. Bundling now offers customers strategic flexibility: with more choices and more variety, they can get exactly what they want. As more and more customers demand it, industries are rushing to create bundled deals that have not existed in the past.

Some advantages for companies include operational improvements in bundled transactions, efficient market segmentation through customized bundles, surcharges for custom integration, volume purchase commitments, the ability to promote bundles as new products, and leverage to extend market power from one market to another.

As a multifaceted strategy, bundling allows companies to manipulate their numerous products and services to deploy existing capabilities in an efficient and effective manner. When using a bundling strategy, companies focus on price, promotion, integration, customization, and/or strategic alliances. The SWOT (Strengths, Weaknesses, Opportunities, and Threads) analysis of the bundling strategy reveals how it can simultaneously counter competition, promote other products, enhance operations, and promote customer satisfaction. Offering an alternative to traditional pricing models based on cost or competition, bundling can change companies into market leaders.

The strategy's major weakness is its legal and ethical implications. When bundling results in reduced competition with little or no benefit to the customer, it has invariably led to antitrust suits. Infamous tie-in-sales models (such as IBM's coupling of mainframe computers and punched cards, and more recently, Microsoft's bundling of Internet Explorer with its Windows operating system) have tarnished the image of bundling as a customer-friendly strategy.

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