Once upon a time, we had fewer places to go that would take care of all our necessities. In many competitive industries like banking, travel, news media, and telecommunications, providing services as bundles created advantage and formed loyalty.
That is no longer the case.
The cost of servicing customers in mature industries has gone up. Take for example unlimited data plans in the telecommunications industy and you see why, with mobile and smartphone usage going up, companies are now switching to a metered approach.
As large organizations look for ways to increase their revenue base, they can:
- transform more transaction-oriented buyers into customers
- sell higher value services to existing customers
It could be a Harry Potter character, tricky and magical at the same time. Unbundledorf is resisted by buyers because the perception is that the sum was greater than its parts. With no reference point for each part, a bundle sounds like a good deal, doesn't it?
Consider a few examples of these dynamics at play:
- Cable - dozens of cable channels, many of which you never watch, give you the illusion of choice. The good selections are slim pickings, and even if a-la-carte would mean buying just what you watch, the subscription price for all the channels seems like a good deal. And it is for the cable industry as well, as long as advertising continues to subsidize the programming. What happens when that's not the case anymore?
- Restaurants - all you can eat buffet often means less than fresh dishes with vegetables in the camouflage version of green and pasta most definitely not al dente. The illusion here is that you will get to eat a little bit of more things, when you end up eating more of less healthful choices. For the restaurant, the buffet may be cost-effective if it can continue to estimate the number of patrons who will go for it.
- Banking - remember when checking accounts where free, credit cards had no annual fees, and ATM withdrawals had not transaction fees? Fewer competitors in the financial services arena has also meant higher overall fees and a need to look carefully to the bank you select. Lack of transparency in service costs in the past has created a precedent for customers who now feel nickel and dimed.
- Air travel - you used to get a ticket with baggage, meal, and beverage included. Then you started paying for meals, or buying your own; paying for bags, or trying to board early with that oversize bag hoping to squeeze it in the overhead bin; paying for drinks; paying a fuel surcharge tax; paying a lot more to use your mileage points, if you can use them at all with all the exceptions, and so on. Putting your tail on a plane seat has its challenges indeed.
The bundled option seems better in the cases where people are not aware of their costs in attention and time, or had no idea that there was a considerable cost associated with delivering those services. Costs businesses can no longer front. In some cases, because their customer acquisition costs have gone up.
Thinking about unbundledorf scenarios, there are two main reasons that make them desirable:
- access to mastery and specialization - you want the best of
- personal selection - you want to make your own experience
Both of which are about value.
When it comes to products and services, price is a data point. Certainly, it's an important one, and there are several pricing strategies you could adopt. Price and value are not always aligned, though. Value takes into account differentiation, which is what makes it valu-able.
The introduction of indiviual song purchases on iTunes and specialized applications in the App Store are two examples of unbundled options that provide value. Offering passengers the option to purchase early boarding with Southwest Air is a simple, and profitable, way to let people select what they value.
In the age of unbundledorf, some products and services will provide the value customers want and make money (and profit) for the business in the process. Others will sound more and more like characters out of a movie with a scary ending.
UPDATE: There were 22 tweets and 6 LinkedIn shares of this post in the morning. The best comment was on Google+, which included +8.