Itemized Economy

Good article in this month's Fast Company: The Urge to Unbundle.

Welcome to the Itemized Economy, where everything has its price. In more and more industries, customers are demanding (and getting) the opportunity to buy exactly what they want and nothing more. For this, thank the Internet, which has made us all better shoppers. And thank the Wal-Mart phenomenon: These days, we're all cheapskates in search of a spend-less strategy.

No suprise that I'm a big fan of this approach; I wrote a couple posts about it here and here back in October. But like everything else, the decision to unbundle depends on your audience. As the article points out,

Inexperienced customers may appreciate the convenience of a package, says University of Mississippi economics professor William Shughart. But knowledgeable purchasers, he says, "will reject bundles that are not the right mix from their point of view. And they will search for other sellers who allow them the option of picking and choosing."

It's likely that you've got a mix of experienced and inexperienced customers in your base. Unfortunately, most companies push bundles (for increased 'stickiness') for lower prices than their a la carte items. This approach can alienate your more knowledgeable customers who feel price-punished for wanting to get the right mix of services for their needs. If they can get the individual parts elsewhere for less, they will.

Comments

[steven streight aka vaspers the grate]

Mentally Correct Marketing is about giving customers choices, letting them control their shopping experience, pay only for what they want.

Witness the success of buying individual song tracks instead of a whole CD containing many songs you may hate, just to obtain a few good ones.

Bundling reeks of corporate power tripping, not smart consumer-oriented marketing.

[ozgur alaz]

Internet makes easier to personalize our products and means to unbundle our products. I think there should be an asit test to decide bundle or unbundle. Bundling is good at for IBM, and unbundling is good at for EasyGroup. Asit test is ,maybe, Is bundling more valuable than unbundling at least %25 more value. If yes unbundling is suitable.

[steven streight aka vaspers the grate]

I want to temper my comments above.

If consumer can choose ala carte OR bundling package discount offers, this scenario would be ideal.

But bundled offerings, where consumers are forced to accept and pay for channels or products they really don't want, or are even offended or annoyed by (HSN home shopping network crapola), this is stupid, the companies are shooting themselves in the foot.

Choice, the perception of being in control of the web site visit and the product selection, choice is the key to increased sales and good will.

If companies really cared deeply about their customers, PR departments and customer service would have half as much complaint/bad publicity work to struggle with.

[Tinuviel]

In fact, in Canada, Rogers Inc. has implemented digital cable television, where you pay per channel. They may even have custom bundles of channels.

I've also heard stories from other people that Rogers will often consider the cost of losing a customer - and grant their requests, when they are angry enough, to have "3 months free cable" every now and then to rival other television providers and their own "sign up and get 3 months free" promotions - that is, when the customer has been around long enough.

[Jon Husband]

Best configuration depends upon the individual customer, no ?

And so what about "a la bundle" ... wherein customers can choose to bundle or not ... at a price that always just advantageous enough to preclude looking elsewhere. Doesn't the basic principle of "mass customization" fit in somewhere here ? Surely those with sharp pencils can figure out, easily, the cost of losing a customer versus the cost of retaining based on price (all other things being more-or-less equal). Surely smarter minds have already sussed this ... what am I missing ?

One can imagine a new variant of "we will not be undersold" ... element by element, or customized bundle by customized bundle.

[Jake]

I think that the idea of bundling comes from an old school mindset about what you can beat consumers over the head with and have them accept. One of the beliefs that most companies have is that you have limited shots at getting consumers to purchase, so you have to berate them into buying bigger and more expensive that one time.

Truth is, more and more consumers are buying more of what they are really interested in and buying it more often. Just look at Amazon and the long tail theory and tell me that people are only buying the blockbuster movies/books/music.

But I think it's more than a simple question of bundled or unbundled. I think it's about consumer power - power to participate in the "creation" of the things they're spending money on. That could be creation in the sense of actually making a product from the ground up or simply choosing the color, the perception and desire from consumers is that they get to choose what they're buying. Like they said in The Matrix - it's about choice.

But for people who learned their craft (marketing, biz, whatever) from decades old theory and textbooks, it's tough to change your thinking.

[Srini]

I have a different perspective on this. When it comes to bundling or a la carte, both companies and customers influence the best configuration. Please see my blog where I take the opposite view on what drives bundling and/or unbundling.
http://kautilya.typepad.com/flywheel/2005/01/fast_take_on_un.html

[steven streight aka vaspers the grate]

Thank you so much for bringing up bundles vs. ala carte.

Bundles Marketing is corporate tyranny, while Ala Carte Marketing is consumer freedom.

Consider the cable tv channels bundle as a case in point. I get all kinds of crap I don't want, especially those ignorant home shopping networks and the All Infomercial Channels. I must accept whatever bundled channels the cable company makes available.

But if there was Ala Carte cable, I could pay only for what I want and no more: for example, C-SPAN, PBS, History Channel, TBS, TBN, local network affiliates,and The Weather Channel.

Bundles are the past. Ala Carte is the future. For probably all types of business and products.