Bundled Pricing Strategy - Essay Example

A good example of bundled products is a package of chips, burgers, sausages, tomato-ketch-up, and some chicken, which most fast-food restaurants sell as one package. The price for one package tends to be lower than the summation of the different product’s prices if compared (Smith 209).

Companies use bundled pricing strategies for numerous reasons that bring advantages that outweigh their disadvantages. Firstly, companies make bigger profits when they sell their products and services using bundled pricing strategy than selling them a la carte (as individual products or services). The causal factor in such a scenario is the attraction that a bundled package evokes in the customers. A customer will be attracted to buy a package at a fair price than buying single products or services that will result in a larger expenditure.

This means that many customers will be more attracted to buy a package of products or services from a company than when the products or services are sold singly. For instance, a person wishing to spend 30 dollars on a meal comprising of chips, burgers, soda, and chicken will be more attracted to a company that offers the package at that price than one which sells the individual products at a higher price. This is the explanation that sees companies using the bundled pricing strategy winning more customers than the companies that sell single products.

The overall revenue for the former is always substantially higher than the latter. It is also important to understand that bundled pricing strategy gives greater satisfaction to customers than single-product sales (Smith 219). However, companies do not base their decision to use bundled pricing strategy on customer satisfaction alone. Companies always assess the level of competition in the market so that they can come up with ways to curb it and get a fair share of profits from the sale of their products and services. Nevertheless, a company can use this strategy to curb competition but it still the other companies in the market can benefit from it. Once a company embraces the bundle pricing strategy, the customers in the market will be pulled to that particular company.

In effect, other companies will have to develop strategies to curb the loss of customers to survive in the market. This will make the other companies establish strategies that will improve the quality of products, services, and branding. This ensures that the superiority of products and services in the market from these companies will be improved, and hence customers will have choices of products and services of a higher quality than before in the market. This is a positive effect, as the companies will have developed more than before the setting of the bundled pricing strategy (Smith 238).