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Bundling: An Important Strategy for IT Channel Businesses

[fa icon="calendar"] Feb 20, 2018 11:32:25 AM / by Derek Wayne

Businesses within IT distribution have found that a bundling strategy can serve them well.


As the IT channel landscape shifts and changes, businesses within the ICT sector are discovering that updating an old marketing strategy can serve them well. 
Enter 'Bundling 2.0'.

Product bundling is one of those dry academic terms which get thrown about in marketing classes at university, and can be officially defined by Wikipedia as 'offering several products or services for sale as one combined product or service package'. It's also becoming an increasingly important go-to-market strategy for channel businesses as traditional categories soften around the edges and businesses move their operations to the cloud.


Traditional bundling has been around for ages, and is utilized by companies in almost every sector of the economy. Think about the IT industry example of buying a laptop bundled with free software, or even Word, Excel and Powerpoint bundled into MS Office. Or fast food 'meals', usually consisting of a main, fries and drink in the restaurant sector.


Bundling is becoming an important go-to-market strategy for channel businesses.
Forte Consultancy however has coined a phrase - Bundling 2.0 - which takes this concept one step further. Whereas traditional bundling looks within one's own company to provide complementary options to the customer, Bundling 2.0 "is the concept of a company looking beyond itself when considering what bundles it can offer its customer base. It’s the idea that many different products and services from within and outside a sector naturally belong together, and can be offered together to potential customers. Such bundles require some form of partnership with another firm, and thus, require more legwork to go-to-market" according to Forte.

The benefits are evident to both a business and its customers. Savings are passed onto those customers willing to buy the bundles, whilst the business gets new cross-sell opportunities. It also opens up new customer markets attracted by the ease of purchase of the bundled products, particularly if the bundling removes the need for consumers to conduct research on product compatibility and complementarity.

Within the fast-changing and ever-evolving IT industry, Managed Service Providers (MSPs) have been demonstrating growth recently. And in a shifting environment where boundaries between hardware, software and infrastructure are becoming less defined, and services are moving to cloud-licensing models, MSPs are well-positioned to take advantage of a bundling 2.0 strategy.


Managed Service Providers (MSPs) are well-positioned to take advantage of a bundling 2.0 strategy.
Many MSPs are already familiar with and provide complementary services within their business offerings. At a basic level for example, many bundle networking, software and helpdesk services. However, in order to meet the needs of certain verticals or specialized customer segments, MSPs will need to employ a bundling 2.0 strategy, attempting to seamlessly integrate SaaS and IaaS solutions with each other and their clients' businesses.

To some extent, this is what Cloud Service Brokerages (CSBs) are already doing. CSBs aggregate a host of individual cloud services serving various markets and verticals and add a layer of value to the original cloud services being offered. One of the ways of doing this is via bundling complementary cloud services serving a range of various functions. CSBs either make the bundle cheaper than if the services were purchased individually, and/or they add expertise via avenues such as integration, migration and billing.

Forte Consultancy suggests five rules & guidelines to follow when designing bundles:

 

  • 1. Always begin a bundling design effort by gaining a deep understanding of your customers and their purchasing behaviors.

  • 2. By understanding the purchases made by consumers in each segment, companies then need to identify their shortcomings in terms of offerings, and look to close those through partnerships.

  • 3. Partner with companies that are positioned in a similar light to yours. The products and services in a given 2.0 bundle should be aligned with each other in terms of their brand value, as the end user needs to perceive all components of the bundle as attractive.

  • 4. Conduct a basket analysis to understand which products naturally go together. By identifying the products and services that are commonly purchased together by customers at the same time, companies can identify the possible variant bundles they can create.

  • 5. Thoroughly pilot all bundles. The importance of this cannot be stressed enough, as piloting provides a great deal of insight into how effective the 2.0 bundle will be when rolled out in mass scale.

Interestingly, research conducted by Harvard Business School in conjunction with Carnegie Mellon University found that groupings are often only successful if consumers are given the option of buying the same products separately. In a term coined Dynamic Customer Segmentation, this way businesses can target both those who are more price sensitive and choose the bundle option, as well as those willing to pay more for just the standalone product.

Bundling thus forms another tool which businesses can use to adapt and thrive within the evolving IT channel environment, and is indicative of the need to constantly innovate and find new strategies in the unending quest for business growth. 
  

Topics: marketing, Channel

Derek Wayne

Written by Derek Wayne

Derek writes on technology, and has a strong passion for the IT channel and how it is in the process of changing to reflect the macro-environment in which it operates.