Sunday, September 7, 2008

Why Unbundle Your Product?

From a marketing perspective, unbundling a product may not always be desirable. But from a economic sense unbundling may be not only be desirable but may be the fair thing to do. According to Hal Varian and Jeffrey MacKie-Mason,

A major role of prices is to present information to people about the true costs of their actions. If prices accurately reflect costs then individuals can compare the benefits of their actions to the costs of their actions and make informed decisions.
With unbundling, a marketer can exactly give that information to their customers, giving them the option to select only those components that are maximizes their value. This assumes that customers know the benefit from individual feature components and can make a decision based on the consumer surplus.

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