Chapter 14: Increasing Revenue with Advanced Pricing Strategies
Allowing mixed bundling Mixed bundling allows customers to purchase the goods either together as a bundle or separately. One of the crucial differences between mixed bundling and pure bundling is that some customers purchase only a single item. These customers have a reservation price greater than the actual price for one item. However, they don’t buy the bundle because the difference between the bundle price and the price of the first item is less than their reservation price for the second item. For example, say you’re willing to pay $30.00 for Software W and only $2.00 for Software X. In addition, the price of Software W separately is $20.00, the price of Software X separately is $15.00, and the price of the bundle is $24.00. Obviously, you’re willing to buy Software W separately — its $20.00 price is less than your reservation price of $30.00. Similarly, you’re not willing to buy Software X separately because its $15.00 price is greater than your reservation price of $2.00. In a surprising result, you’re not willing to buy the bundle. To move from buying Software W for $20.00 to buying the bundle requires you to pay $24.00. This is $4.00 more than you have to pay to purchase Software W alone. Because your reservation price for Software X is only $2.00, it’s not worth spending the extra $4.00 to buy the bundle. The point labeled U in Figure 14-5 represents this situation.
Figure 14-5: Mixed bundling.
255
