When is the right time to unbundle your offerings?

Once taken for granted, the domestic plane tickets do not come with free food and multiple option to change your plans.

These days, we not only play for them separately but also for other conveniences such as extra leg room. Effectively, what has happened is that airlines have unbundled their offering and have begun to offer a-la-carte pricing. So the question is when is the right time to move away from bundles to a-la-carte.

#1. Elasticity of main product: Over a period of time, the buyer’s price sensitivity changes. But it does not change in equal measure for all items. For some items we become very price conscious. Imagine how we agonise over Rs. 300 fare difference, but do not mind paying Rs. 500 for food at the airport or inside the plane. It means that the buyer has a higher price elasticity for airfare and lower for food. In such a case it is best make a pricing offer that indicates the lowest price for the airfare.

#2. Life cycle of the product: As the product or service matures, there is higher competition. This creates pricing pressure and causes some degree of  standardisation the offerings. In this stage of the life cycle, the buyers want to create their own bundles by sourcing it from different providers.

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#3. Impact of unbundling: Unbundling can bring a new lease of life to a struggling industry by expanding the market. The readers may recall the travails of music industry which used to bundle 7-10 songs in a CD. After iTunes came in the picture, the buyers had the flexibility to buy singles which has been benefited the music industry.

#4. Where else do we see unbundling ? : If you look carefully, you can easily spot unbundling. For example, eCommerce firms have started to charge separately for shipment. Similarly, HBR sells articles one a piece apart from monthly subscription.

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