WHY DO FIRM BUNDLE TWO PRODUCTS TOGETHER AND HOW IS IT LIKELY FOR THEM TO MAKE PROFIT?为什么公司把两种产品捆绑在一起，又如何可能获利呢？
What is product bundling? 什么是产品捆绑？
Product bundling is simply means combining two or more goods together and selling them as on one combined product. It is mostly common in market with imperfect competitive product. It is a marketing strategy that joins products or services together in order to sell them as a single combined unit. Bundling allows customers to purchase two or several product at the convenient purchasing power from one company. The products and services are usually related, but they can also consist of dissimilar products which appeal to one group of customers. It based on consumer’s value the grouped package more than the individual items.
Why do producer go into product bundling?
Producers go into product bundling because of so many reasons, bundling of two products gives the producer to offer more affordable prices for their customer with also a better interest for them. Bundling enhances an organizations offering mix while at the same time minimizing cost of both production and selling. This is attractive to consumers who will benefit from a single, value-oriented purchase of complementary offerings. Bundling is attractive to producers by increasing efficiencies, such reducing marketing and distribution costs. It can also encourage customers to look to one single source to offer several solutions.
Product bundling may also incorporate products from multi producers. Example of this is the palo alto software may include one of their business planning product with an accounting software package, or participate in a small business bundle” through a major computer manufacturer whose customers would have the opportunity to purchase with their new PC. In these situations, bundles may cost effectively open to new marketing channels.
FACTORS CONSIDER WHEN BUNDLING INCLUDE 捆绑时考虑的因素
VOLUME: bundling typically increases unit sales volume.
MARGING: bundling can reduce margins.
EXPPOSURE: bundling may offer new channel opportunities or exposure to new potential customers.
RISK: if executed incorrectly, bundling may cannibalize more profitable sale, resulting in lower contribution margins and potential channel conflict.
This last example has three important implications.
First, the market outcome is not necessarily efficient, in the sense that a social planner with full information and no costs of imposing a solution could do better. That should not be surprising in light of the results in the product selection literature that the set of product offerings is not necessarily efficient.
Second, while the model reveals a bias toward the offering of a bundle, the bias is primarily toward mixed bundling, not toward pure bundling or other forms of tying. Indeed, although the preceding example does not show it, the model can be interpreted to suggest a bias against pure bundling. In a companion paper, we show that the conditions for pure bundling to be the only sustainable outcome are stronger than the conditions for pure bundling to be the efficient outcome. The model does not rule out the possibility of inefficient tying. Tying can be. the predicted outcome when components selling is optimal, but there is no systematic reason for this to be the case. There is a tendency in the model for big groups to get the offering they want. But this effect holds equally when the biggest group wants just one component as when the biggest group wants the bundle.
Third, in analyzing the welfare consequences of bundling discounts (under mixed bundling), it is important to distinguish between marginal cost savings and the effect of fixed costs. Both are potential sources of savings to the group that purchases the bundle, but only the marginal cost savings reflect welfare gains. In this example, there is a substantial bundle discount; the bundle price of 19 is 5 less than the sum of the components' prices. Under pure components selling, they would pay a total of 20, which is also more than the bundle price under mixed bundling. Notwithstanding this private benefit, it is inefficient for the bundle to be offered. In contrast, if there were no fixed costs and the bundle discount reflected a marginal cost savings of 5, then mixed bundling would be efficient.
Which products are offered depends on the extent to which bundling lowers marginal cost, on the fixed costs of offering each product, and on demand. For a product to be offered in the kind of contestable market we describe here, three conditions must hold--these are known in the formal economics literature as sustainability conditions.
First, no price can exceed average cost. Otherwise another firm could enter and provide the product to the same group of customers for less.
Second, the price of each product must be low enough that the seller of a second existing product cannot profitably lower its price and attract the purchasers of the first.
Third, prices must be low enough that entry with a product not offered is unprofitable.
First, marginal cost savings are neither necessary nor sufficient for tying to occur in competitive markets. They are not necessary because, even without marginal cost savings, firms may not separately provide a product if there is not enough demand to cover the fixed cost of offering that product this result assumes that the firm is offering a bundle that attracts at least some consumers who want that product. They are not sufficient because, even with marginal cost savings, firms may find that there are enough consumers who want the products separately and do not value the other product they will therefore oiler the bundle to attract consumers who want both and separate products to attract consumers who only want one.
Second, fixed costs are a necessary but not sufficient condition for tying to occur in competitive markets. Firms eliminate a product choice that some consumers want because it enables them to avoid the fixed costs of offering it separately. Or, to put it another way, firms cannot provide some products separately because there is not enough demand to cover the costs.
Third, pure bundling can arise for two reasons which are worth distinguishing: (1) moderate fixed costs when many consumers demand all components and demand is low for at least one of the individual components; and (2) high fixed costs. Without fixed costs, our assumptions generally imply mixed bundling. Under mixed bundling, the bundle is available for those who want both goods and the separate products are available for those who want just one. With some fixed costs, however, pure bundling can result if many customers want both goods and demand for the component does not justify the fixed cost of offering them separately. Pure bundling can also occur, however, even if no consumer wants both components. These will happen when fixed costs are very high, which in turn implies that pure bundling saves significant fixed costs over components selling.
Fourth, firms may sell some but not all of the components separately from the bundle. This occurs when demand for the bundle and one of the separate components is substantial but demand for the other is not.
In a separate welfare analysis we show that firms may not offer the optimal product variety (the standard result in the product variety literature) but that the tendency is to offer too much mixed bundling rather than to offer too much tying. Table 3 contains our first example. The size of each group of consumers is 100. The marginal costs of both goods ; and 2 are 8 while the marginal cost of the bundle is 14. Since the latter is less than the sum of the components' prices, there are marginal cost savings from bundling. Fixed costs are 600 It follows that the prices of the components under mixed bundling are 14 while the price of the bundle is 20. As the next line in the Table indicates, the price of the bundle under pure bundling is 16. It is lower than the price of the bundle under mixed bundling because more customers share the fixed cost. Under components selling, the prices of the components are 11 each. As with pure bundling, the prices are lower than under mixed bundling because the fixed costs are shared with a larger group.
As Table 4 indicates, there are two cases in which mixed bundling are the qualitative outcome no matter how much the variable change (in the given direction). One of these is a reduction in fixed costs. That result makes intuitive sense. Fixed costs in the model can cause a potential product not to be offered. Given the other assumed values in Table 4, fixed costs of 600 are low enough that all three of the possible products can be offered profitably. A reduction in the fixed cost of a product offering would only reinforce the possibility of providing for each group the product tailored to its particular demand.
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