{"id":599,"date":"2013-04-02T11:08:41","date_gmt":"2013-04-02T18:08:41","guid":{"rendered":"http:\/\/www.artsjournal.com\/worth\/?p=599"},"modified":"2013-04-02T11:08:41","modified_gmt":"2013-04-02T18:08:41","slug":"how-bundling-works-5","status":"publish","type":"post","link":"https:\/\/www.artsjournal.com\/worth\/2013\/04\/how-bundling-works-5\/","title":{"rendered":"How bundling works"},"content":{"rendered":"

\"who<\/a>LOVEtheatre of London will provide me with a special deal<\/a>: I can get two tickets to Wicked, together with two “free” meals (drinks not included) to be chosen from a short list of participating restaurants. But if they want to attract me to Wicked, why not just lower the ticket price? Why give me the discount through a dinner for two? Delta airlines will save me money on a trip to Puerto Rico<\/a>, but only if I stay at the Sheraton, and the trip is for three nights. If I buy gasoline from Shell, I can get a discount on a ski lift pass<\/a>. But what do these things have to do with each other? Why not a deal on an oil change?<\/p>\n

These firms are all engaged in a subtle form of price discrimination<\/a>. The problem they are trying to solve is this: how do we offer a deal for those potential customers who are somewhat on the fence when it comes to buying from us, without lowering the price for those who we know are something of a “sure thing”, and willing to pay a high price? How do we lower the price for one group without lowering it for everybody?<\/p>\n

The solution is to offer a deal as part of a bundle that only<\/em> the on-the-fence customers will find interesting. Consider the dinner + theatre example. I will guess that those with a high reservation price for tickets to the theatre – residents of London who are regular attendees at musicals – are not particularly interested in this selection of restaurants. They will have their own favorite places, and are unlikely to take up this offer. Rather, the package deal will be attractive to those on a stricter budget, perhaps tourists who are unsure of where to eat in London, who will find this a good option. The bundle serves the purpose, then, of offering something attractive to those on the fence, without offering a general price cut that would be taken by everybody.<\/p>\n

The other examples follow the same pattern. Delta is offering a deal to the price-conscious vacationer, who won’t mind a stay at the (if I may generalize) safe and predictable Sheraton, while those with more to spend, or business travelers, will not take up the offer, instead just opting for a plane fare. Shell is likewise attracting a particular group of bargain-hunters, without simply lowering prices for gasoline more generally.<\/p>\n

The rule of thumb: if your arts organization is looking to offer a package, it need not be something closely related to what your organization does,* what is key is that it be something attractive not to all<\/em> your potential audience, but just those who are on the margin between attending your show or not.<\/p>\n

Footnote: My former professor Preston McAfee provides in his book Competitive Solutions<\/em><\/a> one of my favorite examples, the Detroit clothier who advertised “buy a suit, get a drill”, where suit buyers would indeed get a discount on a purchase of a drill.<\/p>\n","protected":false},"excerpt":{"rendered":"

LOVEtheatre of London will provide me with a special deal: I can get two tickets to Wicked, together with two “free” meals (drinks not included) to be chosen from a short list of participating restaurants. But if they want to attract me to Wicked, why not just lower the ticket price? Why give me the […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[26],"tags":[],"class_list":{"0":"post-599","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-issues","7":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p3dIW5-9F","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":762,"url":"https:\/\/www.artsjournal.com\/worth\/2013\/05\/how-student-discounts-work\/","url_meta":{"origin":599,"position":0},"title":"How student discounts work","author":"Michael Rushton","date":"May 5, 2013","format":false,"excerpt":"Student discounts are offered many places - in restaurants, theaters, tuxedo rentals - and in both the commercial and nonprofit sectors. Nonprofits might want to discount student prices on equity grounds, giving them a break because they have less disposable income. But commercial firms offer these discounts too. It might\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"show your i.d.","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2013\/05\/Tuxman-Discount-Card1-300x166.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":804,"url":"https:\/\/www.artsjournal.com\/worth\/2013\/05\/why-do-seniors-get-discounts\/","url_meta":{"origin":599,"position":1},"title":"Why do seniors get discounts?","author":"Michael Rushton","date":"May 23, 2013","format":false,"excerpt":"From the Priceonomics blog: You\u2019ve seen them on the bus, in museums, and at movie theaters: senior discounts. As a reward for being old, senior citizens pay a quarter less for bus fare, a small fortune less for movie tickets, and receive discounts generally all over the place. If you\u2019re\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"they don't look poor","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2013\/05\/cocoon-300x232.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1371,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/06\/fixed-book-prices\/","url_meta":{"origin":599,"position":2},"title":"Fixed book prices (updated)","author":"Michael Rushton","date":"June 27, 2014","format":false,"excerpt":"France has passed anti-Amazon legislation. Publishing Perspectives reports: On Wednesday, the French parliament passed a long-debated law that will end Amazon.com\u2019s ability to offer a combined 5% discount and free shipping on books shipped to France, according to\u00a0Livres Hebdo.\u00a0 France\u2019s fixed book price law, dubbed \u201cThe Lang Law,\u201d was passed\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"paid full price","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/06\/french-reader.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":1577,"url":"https:\/\/www.artsjournal.com\/worth\/2014\/10\/art-and-the-estate-tax\/","url_meta":{"origin":599,"position":3},"title":"Art and the estate tax (updated, again)","author":"Michael Rushton","date":"October 7, 2014","format":false,"excerpt":"The New York Times reports on the Elkins case, involving a victory for a wealthy family in a legal fight with the IRS on estate tax owing on a valuable art collection. This is the quote that caught my attention: \u201cMy genuine view is this is a great result for\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"'cause I'm the taxman...","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/IRS.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/IRS.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2014\/10\/IRS.jpg?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":1873,"url":"https:\/\/www.artsjournal.com\/worth\/2015\/03\/dynamic-pricing-and-market-segmentation-at-the-theatre-and-the-hospital\/","url_meta":{"origin":599,"position":4},"title":"Dynamic pricing and market segmentation at the theatre (and the hospital)","author":"Michael Rushton","date":"March 23, 2015","format":false,"excerpt":"This post is about theatre pricing, from a unlikely source. Today's New York Times has a piece by Austin Frakt on hospital pricing, and whether and how changes in funding of patients through public sector programs might change hospital charges to privately insured patients. Mid-way through, the article looks for\u2026","rel":"","context":"With 2 comments","block_context":{"text":"With 2 comments","link":"https:\/\/www.artsjournal.com\/worth\/2015\/03\/dynamic-pricing-and-market-segmentation-at-the-theatre-and-the-hospital\/#comments"},"img":{"alt_text":"how much for a bed with a view?","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2015\/03\/old-hospital.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":943,"url":"https:\/\/www.artsjournal.com\/worth\/2013\/07\/giving-it-away\/","url_meta":{"origin":599,"position":5},"title":"Giving it away","author":"Michael Rushton","date":"July 21, 2013","format":false,"excerpt":"At Slate, Matt Yglesias reports on attendance at a WNBA game in DC, wondering why the stands are not full: Now it's easy to tell a story where the demand just isn't that price-responsive and so the revenue-maximizing price doesn't generate sellouts. But this is what price discrimination is for?\u2026","rel":"","context":"In "issues"","block_context":{"text":"issues","link":"https:\/\/www.artsjournal.com\/worth\/category\/issues\/"},"img":{"alt_text":"no, thanks","src":"https:\/\/i0.wp.com\/www.artsjournal.com\/worth\/wp-content\/uploads\/2013\/07\/free-stuff-sign-300x176.jpg?resize=350%2C200","width":350,"height":200},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/599","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/comments?post=599"}],"version-history":[{"count":0,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/posts\/599\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/media?parent=599"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/categories?post=599"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.artsjournal.com\/worth\/wp-json\/wp\/v2\/tags?post=599"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}