During your product development lifecycle, you will have to consider whether to "bundle products, services & features" vs "unbundling" them.
History has shown bundling works and sometimes, it works not to bundle but to cross and upsell or just focus on a niche.
Purpose of this article
In this article, I will share what I have learned about bundling in product strategy with some examples and then a detailed teardown of Microsoft's Office strategy.
We will look at the 4 different Microsofts Product Strategies in relation to Office products as well as their bundling, pricing, and positioning strategy.
101 - What is bundling/ unbundling?
To drive product and portfolio strategy we need to consider the bundling concept as this impacts your value proposition, positioning, pricing, and distribution strategy.
TLDR; bundling drives the perception of Added Value to the Customer.
- Bundling is the process of combining multiple products or services within a unique offering. Unbundling is the opposite of that.
- This could be from a solution packaging or delivery of experience perspective on products, features, and services.
- It becomes a part of your product, go-to-market, distribution, sales & partnership strategy.
During the process of packaging your solutions, positioning them in a market, or even selling it to a customer, you must first figure out if you will bundle or unbundle them.
Beware of the Startup/ Scaleup over-commitment dilemma
In smaller organizations when you bundle products and service offerings you may overcommit resulting in trying to do everything and end up doing nothing.
Funding, resources, and people capacity is limited.
While in an enterprise this might be your biggest challenge to achieve especially with the internal political alignment that came with scaling everything.
Epic examples of bundling and complex business models
To start this off, I will share some key examples of bundling across different products.
Then we will deep dive into Microsoft Office as I think this is the most relevant to this topic example and covers many bases.
Bundle Examples
- Microsoft bundles subscription & cloud business models with its Office suite and targets everyone from home & student, to businesses and large enterprises.
- Salesforce bundles platform business models with its suite.
They allow their customer to pick various solutions as part of their "platform offering".
Salesforce uses a licensing model with tiers and sub-bundles to sell its product or arguably platform product!
I have seen some really expensive licensing fees with organizations just dishing out millions for their solutions.
- Google positions itself with an analytics suite that addresses the needs of large enterprise licensing business models with advanced customization, scalable tools, and enterprise-level support.
- Humble Bundle is focused on the PC gaming industry with a unique business model around - monthly subscription bundles and package bundles while donating the proceeds of profits to either the developers or charities listed. They allow the user to control this.
Below Image shows the July Monthly Subscription bundle where there is a selection of games provided for purchase.
Below Image shows the Pay what you want bundle where there is a selection of games provided for purchase while also allowing the customer to pay more to donate to charities or the developers.
- Fanatical is also focused on the PC gaming industry and has a somewhat interesting take on bundling using the lucky draw method. The customer pays a fixed amount and then redeems the keys which adds the mini excitement of scratch and win.
Sidebar - If you are wondering, the geek in me uses both these sites to buy games.
A Microsoft Product Strategy Tear Down
Time to look at the crafty strategy of Microsoft.
Microsoft has numerous products under its banner of the office suite.
It also offers key services under this banner such as cloud storage, cyber threat protection, support & deployment. ie: servitization of products.
It does offer unbundled products such as Visio and MS Projects (Project Plan).
Strategy 1 - Old is Gold, do nothing.
Did you know, the first version of Office was in 1988 - yup! MS Office is old.
- This contained a bundle of 3 products - Microsoft Word, Microsoft Excel, and Microsoft PowerPoint.
- 35 years later there is still a version of this bundle being offered called - Home and Student.
💡 Takeaway: If it's not broken don't fix it.
Did you know?
In 2006 Google came along with Google Docs & Spreadsheets, combined with business services to form the Google Apps suite, rebranded as G Suite, and Google Workspace.
Over time it has gained both in features and in popularity, boasting 6 million paying customers as off 2020!
Strategy 2 - Pivoting to New Business Models.
Subscription business models from about a decade ago were very promising and Microsoft did not delay jumping onto this.
They didn't wait for the cloud market either.
The below image is an interesting one which looks at the adoption rate vs competition and this shows the impact of the new business model and the change of the adoption curve when Office caught up to its competition.
- With the rise of the subscription business model, Microsoft moved Office 2013 into Office 365 "service" model.
- They later rebranded this to Microsoft 365 as we know it today.
💡 Takeaway: Pivot into new business models and reinvent the bundles when required.
Strategy 3 - Use Pricing Strategy with Bundles.
Key decisions around bundling often depend on price points that you want to offer products & services to your customer base.
- Customer Base
The more varied your customer base, the more options you have to provide. While many organizations try to focus on a singular customer base, Microsoft takes an agnostic view.
- Tiers vs Features
Price points also drive decisions about what tier of the market you want to compete in and the features that are offered.
- Size matters
Microsoft clearly wants to work at every layer.
💡 Takeaway: While this strategy works for them due to the sheer size of their operational, financial, and cloud capability, this might not work for other companies. So be mindful of picking the right strategy based on the 3 above points.
Strategy 4 - Positioning Strategy with Bundles.
Positioning goes hand in hand with pricing strategy.
At the time of writing this in 2023, the Microsoft suite bundles products based on 2 vertical target markets and multiple horizontal markets - or you can say multiple sub-verticals!
For instance, they offer bundles from 3, 6,7,8, to 13 products within a suite.
This is based on the target market from home & student, to business premium. Each one of these products has a different target market and price point.
- Home - They are targeting the Consumer Market - ie B2C/ D2C.
The home bundles are categorized mainly into 2 - personal (9 products) and family (10 products with 5 more TB).
While the price difference is negligible, this is a key part of their pricing strategy to upsell you into the bundle.
- Business - They are targeting the Enterprise Market - ie B2B.
Microsoft's goal here is to cross and upsell.
- Cross-selling unbundled products strategy
The pricing strategy to cross-sell products in the business suite is more suitable as they have products such as Visio and Project Plan which can bring in an additional 10-15 $ per user per month!
This doesn't apply to the consumer market.
- Business with the Golden Glove Handshake bundle
This is Microsoft's strategy with the top-tier enterprise market.
An average business of 100 employees with the business standard office suite spends an average of $14,000 annually.
While a large business with 100,000 employees, that's 14 million US dollars a year!
Or if they are on their Business Premium plan that's $24 Million a year in revenue.
Conclusion
There are many ways to skin something ฅ(ﾐ꒡⋏꒡ﾐ)∫ - meow!
Bundling decisions require deep thought into pricing and positioning while ensuring that you are creating value for the customer.
The more complex and wider your customer base the more bundles you may want to offer.
The PC gaming world bundles are examples of how creative you can get with the offers in bundling.
Bonus Content
As a bonus to this segment, I am sharing the example shared by Fletch on 3 ways to sell a platform that comes into the way you position a product portfolio.
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