I can’t get no satisfaction: How bundling and multi-part pricing can satisfy consumers and suppliers
Bundling and multi-part pricing may save etailers from mortal challenges attacking the music industry. These strategies are attractive to customers, perhaps spelling the difference between pirating and legally purchasing music; they allow “custom pricing” to capture more of the consumer surplus, and just as importantly, they contribute to developing new artists for long-term viability of the music industry. The many ways to bundle include exact firm-selected bundles, category bundling, customer-selected bundles, and mixing these with individual products. Each of these approaches has specific advantages for different market segments, making up for generally lower prices in the competitive online world. Multi-part pricing affords additional opportunities to capture more of the consumer surplus. These ideas are especially relevant to online music because of the ease of packaging products, the low cost of reproducing music on demand, the reduced friction of consumer/firm interaction, the low cost of monitoring complex behavior, and the enhanced measurement of performance. In the online world, content offerings are revitalized when offered as bundles or service packages.
KeywordsData Structure Communication Network Information Theory Lower Price Complex Behavior
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