EFFECTS OF BUNDLING NON-COMPLEMENTARY PRODUCTS

COMMUNICATION PERSPECTIVE
Vera Aimovi*1, Slavica Cicvari Kosti2, Tamara Vlastelica3
1
Leo Burnett Belgrade
2,3
Faculty of Organizational Sciences, University of Belgrade
*Corresponding author, e-mail: vera.acimovic@leoburnett.rs
Abstract: Product bundling is a very common marketing strategy. Bundles composed of similar, related
products are prevalent in the market. However, there is a growing trend of bundling non-complementary,
unrelated products. This paper aims to explore the ways of product bundling, with the emphasis on bundling
unrelated products, and to identify possible effects from the communication perspective. We employed
qualitative analysis of both secondary and primary data, gathered from specific campaigns in which one of
the authors was engaged as account director for the projects presented as a case. One would expect that
bundling benefits directly from higher degree of complementarity, but there are some circumstances where
asymmetric bundles with lower degree of complementarity can help in reaching more consumers.
Keywords: bundling, product complementarity, communication channels, target audience, consumer
electronics

1. INTRODUCTION
Bundling of products by independent companies is nowadays a very common marketing strategy in several
industries (Brito and Vasconcelos, 2014). Bundled products provide customers an opportunity to obtain a pair
of products for a price lower than that of individual purchase. Examples of bundles can be, among others,
found across following industries: telecommunications (handset and GSM package), food (coffee and
concert tickets), electronics (microwave and recipe books) etc. (McCardle et al., 2006). Furthermore, there
are examples within the service industry as well, such as bundling between hotels and restaurants, airlines
and car rentals, public transport with museums (Armstrong, 2012). Michelin is considered to be a pioneer of
bundling. When they launched the Michelin guide with information about petrol stations, accommodation and
food, maps and directions, they bundled it with a tyre offer (Yan and Bandyopadhyay, 2011).
Sometimes manufacturers employ bundling strategies that are contrary to common practice. For example,
inexpensive products (e.g. household cleaning products) are bundled with high-end products such as
washing machines, vacuum cleaners or refrigerators (Samsung, LG), or dinners in restaurants with premium
dinner-ware (Villeroy and Boch, Christofe, Wedgwood). Marketers can bundle an unknown product with a
well-established one as a product launch strategy. Strong brands are an extremely valuable asset in bundling
strategy, since their attractive attributes can affect quality perception of weak or new brands (Sheng and Pan,
2009). According to these authors, if a bundle contains a strong brand, the weak or new brand is most likely
to be seen as representative of same category group as the strong one, for example high end, quality or
premium.
Stremersch and Tellis (2002) provided comprehensive literature overview on the topic, indicated
inconsistencies in definitions and terminology and presented a classification of various types of bundles with
emphasis on the legal aspect of bundling. Gans and King (2006) describe the bundle as widely used
business strategy where firms tend to obtain customers loyalty by offering interlocking discounts between
particular brands or what seems as a pair of unrelated products. Bundling has also been identified as a tool
for price discrimination, increasing market share and sales, product differentiation and competition reduction
(Girju et al., 2013). Furthermore, bundling can help save transaction, packaging and advertising costs
(Sheikhzadeh and Elahi, 2013) and serve well as mechanism for market entrance; all of this leads to
increased profitability. The trend of using bundles increased over time due to an apparent emergence of
packages consisting of a product and a service (Dukart and Swartz, 2000). Estelami (1999) researched
bundle benefits and found out that the average saving when purchasing bundles goes up to 8%, affecting
customers perception and evaluation of the bundles individual components. Bundling of products can also
serve as a tool for new product introduction (Simonin and Ruth, 1995). An example of this is the launch of
Samsung Galaxy S5 phone exclusively with Telenor, a mobile communications operator in 2014 on the

Serbian market. Bundling also occurs in mergers or strategic alliances, where firms can improve profits by
bundling after integration (Mialon, 2014).
Apart from the benefits bundling strategies provide to companies, they are valuable for consumers as well.
From consumers perspective, bundled products provide the chance to pay less for a pair of products than
the sum when purchased separately. Consumers then have a choice between meeting all of their
requirements, which is rarely accomplished in the bundle, or purchasing items individually for a higher price
(Brito and Vasconcelos, 2015).
Despite the fact that product bundling is a widespread business practice, there are a few researches and
articles that deal with bundling unrelated products between two independent firms, especially when it comes
to promotion. In this article, authors examine bundling of non-complementary products and its effects from
the communication perspective. We employed qualitative analysis of both secondary and primary data of
bundled offerings of electronics on Serbian market from February 2014 till February 2015. We examined
bundles composed of product pairs. We consider that bundling of products of same quality is a natural
scenario (Brito and Vasconcelos, 2014). Even when successful examples could be found on the market, it
was most unlikely that a high-quality producer would be interested in making an alliance with a low-quality
producer that would have likely harmed their reputation. We restricted research to two-item bundles, since
they are most common on the market (Harlam et al., 1995). We considered two broad groups of products:
consumer electronics and personal care. The results provide insights into good practices of bundling these
classes of products.
This article is organized as follows: the next section presents definitions of bundling and introduces product
complementarity in bundling. The following section develops a set of key propositions for bundling noncomplementary products. The final section presents our conclusions, implications, and limitations.

2. BUNDLE COMPOSITION
In this section we investigate bundle components, types of bundles and product complementarity, whereas
last has not received proper attention in existing academic literature, but may have major impact on bundle
promotion.

2.1. Bundle terminology and definitions

According to Stremersch and Tellis (2002) there is no consistent, universally accepted definition of bundling
due to lack of consensus in literature and proper use of terms, as well as vague distinction between
important formulations and ambiguous domain of application. Adams and Yellen (1976) define product
bundling as selling goods in packages. Guiltinans (1987) definition considers bundling as a practice of
marketing two or more products and/or services in a package for a special price. Recent literature still sticks
to Yadav and Monroe (1993) definition, similar to the previous one, and sees bundling as a selling of two or
more products in a package, at a special price. In this paper, we use the latter definition. Yet, due to a lack of
literature consensus on a precise definition, practical implications of product bundling are still imprecise as
well. Some of the basic terms that are present in literature are described below.
Bundling. Bundling is the sale of two or more separate products in one package. The term products refers
to both goods and services. If there are separate markets, or at least some customers want to buy products
separately, we can legitimate the term "separate products" (Stremersch and Tellis, 2002).
Bundling focus. There is a significant difference between product bundling and price bundling, though
sometimes literature lacks clear distinction between the two. Price bundling is the offer of a package of two
or more separate products at a discount. Since products are not otherwise integrated, bundling itself does
not create added value. There are many examples for this, for instance: McDonalds Big Mac meal. Product
bundling integrates two or more independent products at any price. This generally brings significant added
value to customers, think of convergence (mobile phone and TV), convenience (cable TV, internet and
landline), performance (proteins plus personal fitness plan), and reduced risk (car insurance and life
insurance). It is important to differentiate price and product bundling, whereas price bundling is a pricing and
promotional tool, while added value provides more strategic dimension to product bundling. Price bundling
can be used on short notice, while product bundling demands long-term planning (Ulrich and Eppinger,
1995).

Bundling form. Bundling may occur in one of following forms: pure or mixed. Pure bundling offers only
bundled products for sale while mixed bundling is a strategy where firms offer both the bundle and each
individual product separately. Pure bundling is preferred whereas pure bundling and mixed bundling are
proportionally profitable (Hui et al., 2012).

2.2. Complementary and non-complementary bundles

In this study, we focus on functional complementarity, where bundle components are dependent or
functionally related (Ahluwalia, 2008). This concept is based on a wide scope of relations between bundled
products: target audience overlap, convenience and usage situation, functional similarity, timing, image,
occasions, seasonality, distribution, promotion, demand (Varadarajan, 1986). Guiltinan (1987) states that the
degree of product complementarity is a crucial factor to the success of bundling strategy.
Complementary bundles are those in which individual products are functionally related (Sheng et al., 2007)
and can be used together as a system in order to perform certain activity (for example: hotel and rent-a-car,
razor and blade). In a perfect setting, one of the products creates the need for consumption of its
complement - for example, demand for cheeseburger creates parallel demand for soda, ketchup, mustard
etc. It is widely accepted that level of complementarity affects and enhances consumer perception of bundle
components (Meyers-Levy at al., 1994). Complementarity of the bundle can offer economies of scale, and
demand for one product creates a demand for its complement. Firms can thus gain more marketing effects
through bundling, and moreover, profit - since consumers are more likely to purchase both products if the
price is reasonable (Yan and Bandyopadhyay, 2011).
Non-complementary bundles are composed of products that are not functionally related to one another, have
weak associations and are less likely to be used in common usage situations (for example: washing machine
and make-up, mobile phone and sunscreen). With lower degree of complementarity, there is asymmetrical
equilibrium, and majority of consumers opt for the dominant product (in terms of brand, price or demand)
while fewer consumers decide to buy both (Yan and Bandyopadhyay, 2011).
Although complementary bundle seems like a reasonable, obvious and somewhat logical choice, there is an
increased number of non-complementary bundles on the market, and in the next chapters of this paper we
will try to find a reason why firms are doing so.

3. RESEARCH METHODOLOGY AND RESULTS

Our study employed examples of real brands in the marketplace in order to ensure the relevancy for
managerial implications. Methodology used for illustrating the practice of bundling products is a case study
analysis. We employed qualitative analysis of both secondary and primary data, gathered from campaigns in
which one of the authors was engaged as account director for the projects presented as a case. Campaigns
refer to bundled offerings of electronics and were executed on Serbian market, from February 2014 till
February 2015. We examined bundles containing pairs of products of same quality, as we identified it as
natural scenario (Brito and Vasconcelos, 2014). We considered two broad groups of products: consumer
electronics and personal care. Samsung was chosen as a focal brand, while Sephora, Nivea and Braun were
chosen as non-complementary brands. Bundles were assembled the following way: one consumer
electronics product and one personal care product, as shown in table below:
Table 1: Product bundles used in desktop research
Bundle
Focal Brand
Washing machine and make-up
Samsung Black lady WM
Mobile phone and sunscreen
Samsung Galaxy S5
Microwave and razor
Samsung MWO

Non-complementary brand
Sephora make-up
Nivea Sun Protect 50
Braun shaver

All three bundles were launched on the market during 2014, and to make things more interesting all three
bundles were used to support product launches of respective products.
We explored communication of all three bundles using secondary data sources that include retailers and
manufacturers websites, social network channels and available web archives. Furthermore, we used primary
data gathered from the campaigns (web banners, social media posts, web site, OOH, leaflets, wobblers,
window graphics), as one of the authors works at advertising agency Leo Burnett and was engaged as

account director for the projects presented in the paper. These examples are published in consideration of
both the agency and the retailers (Homecenter, Positive line) who launched the aforementioned bundles,
with the acknowledgment of Samsung.
In order to prove our findings, we used what we considered the control bundle, composed of complementary
products Samsung UHD TV and Pickbox, also launched in 2014, on the same market and at the same time
as non-complementary bundles that were investigated.
On the basis of theoretical background and direct authors involvement in planning and executing bundle
offerings, we compared the span of target audiences and the number of communication touch points in order
to identify the effects from the communication perspective. Results are given below.

3.1. Effects of bundle offerings

When the level of complementarity is high, the associations between two products are strong (Khandeparkar,
2014). Therefore, its likely to assume that target audience will be more compact and similar in consumption.
Bundles composed of complementary products tend to have significant target audience overlap (in our
example, a consumer who purchases a Samsung UHD TV is more likely to have interest in a Pickbox, since
both products can work as a system, and are fulfilling very similar needs, due to functional relations). With
the low level of complementarity, products are addressing different and broader target audiences, with lower
overlap. In the presented case, analysis showed that the lower level of complementarity between the bundle
components reaches the broader target audience.
The rationale for this lies in the fact that consumer electronics products and personal care products have low
degree of overlap of desired target audiences. On one side, we have consumers who are motivated to buy
e.g. washing machine, while on the other side we have consumers who are not considering purchase of
white goods before they are addressed with joint communication. The presence of both products works as
added value for the first group (since the price of make-up is considerably lower than that of washing
machine), and for the other group, interested in cosmetics, this type of bundle manages to raise awareness
of non-complementary bundle component. Therefore, we have a broader target audience we are addressing,
with a potential - raised awareness will create prompted interest in purchasing bundled products. If the
products are complementary (UHD TV and Pickbox), this type of bundle raises interest within a homogenous
target audience, with low or no potential to induce purchase intention within other target audiences.
Furthermore, from our experience, the lower level of complementarity of bundle components provides more
communication touch points. This proposition indicates that bundling of non-complementary products has a
considerable effect on the number of communication touch points. Lets examine a bundle composed of a
Samsung washing machine and a piece of Sephora make-up. In this example we have joint communication
channels, such as mass media (OOH, print, web, TV), social network channels (Samsung, Sephora and
Homecenter respectively), retail (Homecenter). When comparing it to a bundle consisting of complementary
products (Samsung UHD TV and Pickbox), we noticed that that number of communication channels was
lower, since Homecenter is a retailer of both Samsung and Pickbox, due to the similar product
categorization. This is a potential task for further examination: what is happening if products of same
category, but with low level of complementarity are sold in bundle by different retailers? For example,
supermarkets have a broad scope of product categories, and this type of bundle is more likely to happen in
such retail environment.

4. CONCLUSION AND MANAGERIAL IMPLICATIONS

Previous researches investigated bundles from different perspectives. Determining which products should be
bundled in order to maximize communication effect is a challenging issue when deciding about bundling
strategy. In this paper we analyzed examples of bundles composed of a pair of otherwise unrelated, noncomplementary products, and identified that they can serve as important communication tool that could
provide a broader target audience and - under certain circumstances - engage more communication
channels. Our findings indicate that firms should join in bundle arrangements of unrelated products if and
when they want to penetrate into secondary target groups and decrease the level of advertising investment.
There are several limitations to our research: it was conducted specifically for consumer electronics products
combined with personal care products with a specific retailer. Further research should explore a more
complete information setting, at least more different industries and bundled products.

A manager can use our insights in order to decide on an optimal bundling strategy. If their major goal is to
maximize profit, they can combine highly complementary products and charge them at a relatively lower
price (Yan and Bandyopadhyay, 2011); or if they are undertaking activities that affect market size in terms of
broadening the scope of target audiences, they can combine non-complementary bundles in partnership with
unrelated companies from different industries.

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