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Bundling the Kachingle Way

Bundling the Kachingle Way

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Published by Daniel Reid

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Published by: Daniel Reid on Oct 16, 2012
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01/23/2013

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 Bundling the Kachingle Way - Is Thisthe Holy Grail for App Developers?
October 15, 2102 | George Typaldos – Research Analyst at Kachingle,Inc.
The Kachingle Genesis
From the very beginning our founder, Cynthia Typaldos, loved micropayments. In a bigworld little things can add up, she reasoned. And micropayments will be a key in the newglobal economy. With this inspiration she attempted to help people enrich the web. With alittle financial encouragement from those who read blogs, newspapers, and communitywebsites, all of us might benefit. This was her thinking. Content providers could besupported, and news outlets on the web could have a new source of revenue. To this end,she founded Kachingle.The premise was simple — people want to give. They want to support the web sites theyvalue. But how can someone on a budget donate to so many websites easily and withouttoo much of the money eaten up in transaction fees? The best way she found is forsubscribers to deposit a small amount into an account for donations, visit their favoritewebsites, and then have their donations automatically distributed from their account totheir favorite web sites.But, what is the best way to disperse the monies? What is the fairest and simplest way todo it? The answer she discovered is to pay each website in proportion to how often it isvisited. And this is the distinction that makes Kachingle so unique today after its pivot intohelping app vendors and content providers with this technology.The Kachingle model works well with mobile, PC and SaaS web apps as well as content.Apps and content of all sorts can be packaged together in bundles and subscription feesare then distributed fairly to the participating vendors.
Where Bundling Works
Just look at television cable and satellite offerings. They bundle at every possible pricepoint. It is obvious how effective bundling is by offering a better deal for the subscriberwhile extracting more revenue from them.Bundling cable channels works well for viewers. There are movie bundles, sports bundles,and special premium packages. There are also plenty of specialty channels. If viewers hadto watch all the channels to decide which ones they wished to pay for, and cable providerspriced and sold the channels individually, customers would become frustrated from ‘shopping’, buy less and only buy what they needed. Hello app vendors and contentproviders.But with bundling, the viewer pays more and gets more, much more — all with a singlepurchase. This is another advantage of bundling — choices are narrowed for customersand every choice is an upsell. Plus, research has shown that customers prefer to buy froma single vendor.
 
Why Bundling Works
Bundling works when customers have an interest in more than one product in a bundle.Bundling is upselling. Customers are upsold because of the additional value. It is throughthe enticement of this additional value that bundling works to maximize sales revenues.Bundled products need to be relevant — and to be relevant they need to becomplimentary to each other. Most importantly, they need to be enticing which can bestbe accomplished by bundling offerings from various vendors, and offering them at anirresistible price. Bundles can be assembled to satisfy different groups of users. A vendorwith an offering in a bundle can then point their customers to that bundle and say “Buythis bundle. It has everything you need.” Bundling works best where product costs are low. Apps and content of all sorts are perfectfor bundling because additional products can be offered at marginal incremental costs tovendors and pricing can be very flexible.
How Bundling Works
If a potential customer comes to your SaaS website and they have $100 to spend; youwant that $100. What products you need to sell those customers to get that $100 is reallyirrelevant as long as those products have value to them. From this perspective, andassuming your cost of providing extra products is low, bundling brings you the mostprofit. Bundling is a proven profit maximizer and that is why it is used as a majormarketing strategy across numerous industries. When product costs are marginal, bundling is the marketing strategy that wins the day.Place yourself in the shoes of a vendor who has three SaaS products for sale;
A
,
B
, and
C
.Product
A
sells for a very reasonable monthly price of $10. For product
B
the vendorcharges $15/month, and
C
is priced at $20/month. The total retail value is $45/month.They then decide to put them into a bundle and offer all three products for $25.
 
Along comes Joe and Joe is looking to buy product
A
for $10/month. He would also likeproduct
B
but is only be willing to pay $10/month for it. Joe might be interested inproduct
C
but he is only willing to spend another $10/month. He buys the bundle.Our second customer is Mary who is looking to buy product
B
for $15/month. She doesn’tneed
A
,
 
but would pay $10/month for
C
. She buys the bundle.Our third customer is Al who would like all three products but is only willing to spend$5/month on
A
, $10/month on
B
, and $10/month on
C
. He buys the bundle.Our fourth customer is Jen and she is only looking to buy
C
, but because it only cost $5more to get both
A
and
B
, she is compelled to buy the bundle.All four customers are upsold. And all four customers found value that they will likely wantto keep. You see bundling can also increase customer retention. A customer who chosenot buy the bundle likely could not have been upsold anyway.Our vendor is now receiving $100/month from selling the four bundles. Without bundling,their sales would have only been $45/month.
 
Next, let’s look at what would happen if their strategy had been to undercut thecompetition. To do this they might have lowered their prices on each product by $5.Product
A
would sell for $5/month, product
B
for $10/month, and product
C
would sell for$15/month. What sales would they have made with our four customers? The sales resultsare here:Joe would buy
A
and
B
for a total of $15.Mary would buy only
B
for $10.Al would buy
A
and
B
for $15.Jen would only buy
C
for $15.By discounting products
A
,
B
, and
C
, their sales would have only been $55/month.
Bundling and Virtual Partnering with Kachingle
The Kachingle Platform allows subscribers to buy bundled apps and content, and allowsthe vendors to earn revenue every time their apps are used or content is accessed.Kachingle is not an app store – it is a behind-the-scenes player enabling vendors todistribute, bundle in various ways, and off-load billing.A bundle represents a community of vendors. Vendors work together as they would in aco-op. They each bring value to the bundle and they bring in subscribers by offering theircustomers their Kachingle bundle option. Vendors also receive referral fees for everycustomer they bring into Kachingle.Cross-marketing, also referred to as co-marketing,is a powerful tool especially when coupled with bundling. Vendors can display a bundle’s offerings prominently, often withother vendor’s offerings that are complimentary to their own, show a bundle as a specialoffering, or only offer the bundle as a last resort to sell to a tough customer. If a vendor’sapp is in a bundle with ten other complementary apps, and each vendor is promoting allthe apps in the bundle, then the exposure of each app is over ten times as great. Vendorsget greater exposure and potential users discover apps they may not have been able todo otherwise.The Kachingle Platform can handle all types of bundling:
 Co-op Bundles –
This is
 
where all apps are counted equally and points are awardedfor visits and duration of use
Point Bundles -
This is
 
where users can turn on and off apps as they need thembased on how many points they buy, or they can upgrade by purchasing more points.
Anchor bundles -
This is
 
where an anchor vendor gets a fixed amount of money persubscriber, and the ancillary offerings in the bundle get usage based revenue.
White label bundles
– This is
 
where Kachingle is anonymous for the most part, andwould be applicable to existing app store.

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