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Price Bundling-Module 2

Marketing Analytics

Why Bundle?
To get customers to purchase more products than they would have without
bundling.
Automobile Companies
Travel Agents

Microsoft Office

Mental Accounting: Whos Happier?


Mr. A was given tickets to lotteries involving the National Series. He won Rs.
50000 in one lottery and Rs. 30000 in the other.
Mr. B was given a ticket to a single, larger National Series lottery. He won Rs.
80000.

Mental Accounting: Whos Unhappier


Mr. A received a letter from the IRS saying that he made a minor error on his
tax return and owed $100. He received a similar letter the same day from
his state income tax authority saying he owed $50. There were no other
repercussions from either mistake.
Mr. B received a letter from the IRS saying that he made a minor error on his
tax return and owed $150. There were no other repercussions from his
mistake.
Gain vs Pain

Further Examples
Suppose you own Wonderla Amusement Park and each customer values
the five rides in the park as follows:
Giant Wheel: Rs. 50
Mixer: Rs. 40

Up and Down: Rs. 30


Sliding: Rs. 20
Space walk: Rs. 10
How can Wonderla maximize revenue from these rides?

Example
Suppose you sell two products and have two potential customers that
value each product as shown: (Cost=0)
Product

Customer 1

Customer 2

Computer

Rs. 20000

Rs. 10000

Monitor

Rs. 10000

Rs. 20000

20000 for each product?

Mixed Bundling
Seller Offers a different price for each available combination of products.
Customer

Computer

Monitor

Rs. 9000

Rs. 8000

Rs. 11000

Rs. 6000

Rs. 13000

Rs. 4000

Rs. 15000

Rs. 2000

Unit Cost

Rs. 10000

Rs. 3000

What all can the seller do to maximize profits?

ABC Electronics Example


Suppose ABC sells phone, internet access and TV to customers. Customers
can buy any combination of these three products (or not buy any). The
seven product combinations include the following:
Internet, TV, Cell Phone, Internet and TV, Internet and Cell Phone, TV and
Cell Phone and All three products.
The worksheet ABC Electronics gives the amount 77 representative
customers are willing to pay per month for each service. Use the
Evolutionary Solver Engine and the willingness to pay data to determine a
price for each product combination that maximizes revenue.

Microsoft Office Example


Microsoft is going to sell a Student Version of Office and a full version of
Office. Assume there are three market segments whose size and valuations
for each version of office are given in the table in Microsoft worksheet.
What price for each version of Office can maximize Microsofts revenue?

Song Data
The worksheet songdata.xlsx gives the values several hundred people
place on 15 downloadable songs.
1) If you charge a single price for all songs, how can you maximize
revenue?
2) If you charge two different prices for songs, how can you maximize
revenue?