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Estd 4.22.2023
Bundling can indeed increase customer lock-in and perceived value—making it harder for customers to switch and helping reduce churn. Our pricing strategy book, Price to Scale, explains that when multiple products are bundled, the combined offering often enhances overall value and even boosts average revenue per user (ARPU) by encouraging customers to adopt more services than they might individually. This is particularly effective when the products complement each other well and together address a broader set of customer needs.
However, bundling isn’t without its downsides. The book cautions that if even one component of the bundle fails to deliver strong value or if the bundle becomes overly complex, it can create confusion or dissatisfaction. This misalignment can not only reduce the perceived value of the overall offer but also limit pricing flexibility. For instance, customers might feel overwhelmed by a surplus of features or perceive that they’re paying for unnecessary extras, which could have the opposite effect—increasing churn.
In summary:
- Bundling can help reduce churn by increasing lock-in and delivering greater overall value.
- If not carefully designed, particularly if one product underperforms, bundling can backfire by complicating the offer and reducing individual product appeal.
As discussed in Price to Scale, the key is to align the bundle structure closely with customer needs and maintain clarity in the value proposition of each component. This balanced approach maximizes the benefits of bundling while mitigating potential risks.