The Great Re-Bundling: How to Embed Customer Centricity into your Bundling Strategy

This article was written by Jamie Perry, Client Partner  

It is generally accepted today that a well-structured and priced subscription bundle reduces subscriber churn relative to a la carte offerings. Academic thinking is clear, and empirical evidence bears this out. So now everyone is launching bundles, but which bundles are going to be the winners? 

The cable bundle dominates 

Back in the days of “peak” cable bundle, consumer choice was limited by distribution infrastructure: consumers could only choose between options that were physically wired into their street, severely constricting choice, sometimes to a single option. As a result, providers did not spend much time on bundle innovation. Being present was enough.     

There was one important addition to bundling theory that emerged from this era. Brands can significantly increase perceived value for a bundle of offerings by integrating the elements of the bundle, making it easier for consumers to use. Imagine two cable bundles of 1,500+ channels, each at the same price point. One includes an on-screen cable guide, allowing users to search for shows, channels and content categories to find what they want, and one does not. Which one would you choose?   

However, as the price of cable bundles steadily increased, consumers started to question whether they really needed 1,500+ channels, many of which they never watched. Cable companies added more channels to increase the perceived value of the bundles and consumers’ willingness to pay. Meanwhile, consumers began to crave more personalized, curated and smaller sets of content options that better reflected their tastes, and lessened the nagging concern they were paying for channels they never watched. 

The internet changed everything (again) 

Once the internet eliminated the physical infrastructure constraint, anyone could provide anything to everyone. Content fragmented and proliferated, leading to an explosion of standalone content streaming options, from the broad (e.g. Netflix) to the niche (e.g. Crunchyroll). Consumers were overwhelmed with options, leading to an initial surge in subscriptions, followed by the great cancellation, as the cost became too high for many and economic reality began to bite. 

Starting with the Disney bundle, content providers began to bundle their streaming offerings together to reduce churn. As evidence emerged that this was working, other content companies began to follow suit. But there is a problem. 

What I have vs. what you need 

Virtually all streaming bundles out there today comprise combinations of owned offerings.  For example: 

• The Disney bundle includes Disney+, Hulu and EPSN+ 

• Apple One includes AppleTV+, Apple Music, Apple Arcade, Apple Fitness, Apple News and iCloud+ 

These bundles are brand-centric rather than customer-centric. What if instead of building bundles around assets they already own, brands rethought bundles and built them around customer segments with well-defined sets of needs and motivations and included third-party offerings that complemented their own? Imagine a cross-industries college student bundle, combining Netflix with Walmart+ and Uber One. Wouldn’t these be even more compelling than the bundles we see today? 

Putting the consumer at the center 

At Material, we believe that brands must be laser-focused on the human perspective to ensure they identify ways to fulfill the diverse spectrum of human needs, rather than trying to conjure up a human need to fit their product.

This begins with understanding your audience at the human level and identifying core groups of consumers with shared sets of needs and motivations, then designing products and experiences micro-targeted at meeting those needs and motivations.

Building better bundles 

The bundles of the future should be designed for and marketed towards specific customer segments. Brands will likely have a broad range of bundled offerings designed for and marketed towards specific groups, like telephone companies do today. These should lead with and highlight the elements of the bundle most likely to appeal to each segment. 

It’s also important to ensure the elements of a bundle have clear, transparent a la carte price points, so consumers can do the mental accounting that quickly shows them that the bundle is a smart deal. It also makes bundles feel coherent through smart branding that highlights the benefits (e.g. McDonald’s Happy Meal or Value Meal).    

Bundles should combine digital and physical offerings that are curated to appeal to specific customer segments, regardless of who owns the individual elements of the bundle. Bundle composition, branding and messaging should vary by audience and market as bundles become more focused on addressing specific audiences and needs.   

By putting the customer at the center, these bundles will feel more relevant, which will better enable them to grab customers’ attention, and which will ensure even greater stickiness than the nascent bundles we see today.   

Dive deep into the heart of consumer behavior with Material, where science meets strategy to drive unparalleled business growth. Our work centers on the power of human insights, fueling transformative outcomes for the world’s leading brands. With our proprietary science-based approach, we unlock the secrets of consumer behavior, paving the way for actionable insights, nimble activations and continuous learning.