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The profit benefits of bundle pricing of complementary products

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  • Yan, Ruiliang
  • Bandyopadhyay, Subir

Abstract

In an attempt to provide a framework that can help firms find optimum bundling product categories and pricing strategies that maximize their profits, this study develops a profit-maximization model. The results indicate that optimum bundles and price strategies exist; specifically, if a firm uses a bundling strategy to sell its products, it should combine highly complementary products and charge a relatively lower price. The value of a bundling strategy always increases with the size of market and price sensitivity. Managers can use the provided model framework and related advice and examples to plan their bundling strategies.

Suggested Citation

  • Yan, Ruiliang & Bandyopadhyay, Subir, 2011. "The profit benefits of bundle pricing of complementary products," Journal of Retailing and Consumer Services, Elsevier, vol. 18(4), pages 355-361.
    • Handle: RePEc:eee:joreco:v:18:y:2011:i:4:p:355-361
    DOI: 10.1016/j.jretconser.2011.04.001
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    References listed on IDEAS

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    Cited by:

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    2. à lvarez-Albelo, Carmen D. & Hernández-Martín, Raúl & Padrón-Fumero, Noemi, 2020. "The effects on tourism of airfare subsidies for residents: The key role of packaging strategies," Journal of Air Transport Management, Elsevier, vol. 84(C).
    3. Pan, Fei & Pan, Shenle & Zhou, Wei & Fan, Tijun, 2022. "Perishable product bundling with logistics uncertainty: Solution based on physical internet," International Journal of Production Economics, Elsevier, vol. 244(C).
    4. Yan, Ruiliang & Myers, Chris & Wang, John & Ghose, Sanjoy, 2014. "Bundling products to success: The influence of complementarity and advertising," Journal of Retailing and Consumer Services, Elsevier, vol. 21(1), pages 48-53.
    5. Carmen D. Ã lvarez-Albelo, 2020. "The role of complementarity of goods in a mixed bundling strategy," Economics and Business Letters, Oviedo University Press, vol. 9(1), pages 31-40.
    6. Girju, Marina & Prasad, Ashutosh & Ratchford, Brian T., 2013. "Pure Components versus Pure Bundling in a Marketing Channel," Journal of Retailing, Elsevier, vol. 89(4), pages 423-437.
    7. Ritwik Raj & Mark H. Karwan & Chase Murray & Lei Sun, 2022. "Itemized pricing in B2B bundles with diminishing reservation prices and loss averse customers," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(4), pages 375-392, August.
    8. Raghu Nandan Giri & Shyamal Kumar Mondal & Manoranjan Maiti, 2020. "Bundle pricing strategies for two complementary products with different channel powers," Annals of Operations Research, Springer, vol. 287(2), pages 701-725, April.
    9. Lee, Sunghee & Yoo, Shijin & Kim, Daeki, 2016. "When is servitization a profitable competitive strategy?," International Journal of Production Economics, Elsevier, vol. 173(C), pages 43-53.
    10. Ge, Houtian & Gomez, Miguel I. & Richards, Timothy J., 2023. "Retail Intermediation and Price Premium of Local Foods," 2023 Annual Meeting, July 23-25, Washington D.C. 335857, Agricultural and Applied Economics Association.
    11. Xinbao Liu & Xiaofei Qian & Jun Pei & Panos M. Pardalos, 2018. "Security investment and information sharing in the market of complementary firms: impact of complementarity degree and industry size," Journal of Global Optimization, Springer, vol. 70(2), pages 413-436, February.
    12. Wen-wen Ren & Yong Liu & Qi Zhang & Xiao-ying Wang, 2022. "Sales strategies considering consumer purchasing preferences for imperfect complementary products," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(2), pages 164-182, April.
    13. Mokhtari, Hadi, 2018. "Economic order quantity for joint complementary and substitutable items," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 154(C), pages 34-47.

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