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Capture and defend margin

Bundling and unbundling

Examples checked

In one minute

Selling products together for one price, or splitting one price into separate charges.

The big idea: A bundle gets customers to pay for things they value differently, and makes them less likely to leave. Unbundling lets price-sensitive customers pay less and charges the rest for extras. Which one wins depends on how differently customers value the parts.

Works when
Bundle when parts cost little to add and customers stay longer; unbundle when customers differ a lot in what they want to pay for.
Fails when
When a bundle forces customers to pay for what they do not want, or a dominant firm uses it to shut rivals out and regulators act.
Check this number first
Churn with and without the bundle. The main payoff of most bundles.
In the worked example
Profit per bundle customer a month: USD 12 (USD per bundle customer a month). See it add up

What it is

Bundling means selling several products together, often for less than their separate prices: a phone plan with streaming, software suites, insurance packages. Unbundling is the opposite: a low base price with extras charged one by one, like low-cost airlines charging for bags and seats.

  • Pure bundle. Products sold only together.
  • Mixed bundle. Products sold alone or together, with a discount for the bundle.
  • Unbundling. A low headline price, with extras sold separately (often called ancillaries).

Why companies do it

The economic logic, most important first. A move usually rests on one or two of these.

  • Customer relationship. A customer with three services from you is much less likely to leave than one with one.
  • Pricing power. Bundling captures more of what customers are willing to pay across products they value differently.
  • Scale. Products with a near-zero extra cost (software, content) add revenue almost free to the bundle.

When it creates value, and when it destroys it

Creates value when

  • The added product costs little per customer and lowers churn (the share of customers who leave each month).
  • Customers value the parts differently, so one price captures more than separate prices would.
  • Unbundling: some customers want only the basic product and others will pay for extras.

Destroys value when

  • The bundle discount gives away more than the churn saved.
  • Unbundling feels like hidden charges and damages trust.
  • A dominant firm ties products together to shut out rivals, and competition authorities force changes.

The numbers to check

Ask for these, in this order, before you recommend the move.

  1. Churn with and without the bundle. The main payoff of most bundles.
  2. Cost of the added product per customer. Content licences and support are not free.
  3. Lifetime profit per customer. Monthly profit times the months a customer stays.
  4. Take-up of extras (for unbundling). What share of customers buy each extra, and at what price.

Worked example (illustrative)

Rounded numbers for a made-up business, shaped like real ones. Positive lines add to profit; negative lines are costs.

A mobile operator sells a plan at USD 25 a month, costing it USD 12 to serve; 3 percent of customers leave each month. A bundle with a streaming service would sell at USD 30, cost USD 6 more per customer for the streaming licence, and cut churn to 2 percent.

Worked example for Bundling and unbundling, in USD per bundle customer a month. Illustrative figures.
LineUSD per bundle customer a month
Bundle priceUSD 30
Network and service costminus USD 12
Streaming licence per customerminus USD 6
Profit per bundle customer a monthUSD 12

Check: the lines above add up to the total.

The numbers that decide it

Months a bundle customer stays: 1 / 2 percent
50 months
Lifetime profit with the bundle: USD 12 x 50 months
USD 600
Lifetime profit selling the plan alone: USD 13 a month x 33.3 months
USD 433

So what: The bundle earns USD 1 less a month (USD 12 against 13), yet each customer is worth about USD 600 over their life against about USD 433, because they stay 50 months instead of 33. The case for the bundle rests on the churn number.

Real examples

Companies that made this move, by region, with what happened and a source checked on the date shown.

  • Microsoft (Teams)

    EuropeMixed

    After a European Commission investigation into bundling Teams with its Office suites, the Commission in September 2025 made Microsoft's commitments binding: it must offer the suites without Teams at a lower price and widen the price gap between suites with and without Teams by 50 percent.

    The lesson: A dominant firm's bundle can be challenged as shutting rivals out; check the competition rules before tying products together.

    Source 1: European Commission, press release IP/25/2048, 12 September 2025 (opens in a new tab), checked .

  • Ryanair

    EuropeCreated value

    Unbundling: Ryanair sells a low base fare and charges for bags, seats and priority boarding. Those extras (ancillary revenue) were about 32 percent of its operating revenue in the year to March 2026.

    The lesson: Unbundling lets price-sensitive travellers pay less while others pay for what they value.

    Source 2: Ryanair Holdings, Annual Report 2026 (opens in a new tab), checked .

  • Amazon (Prime)

    United StatesMixed

    Prime bundles delivery, video and other services for one fee. In September 2025 Amazon agreed a USD 2.5 billion settlement with the US Federal Trade Commission, including USD 1.5 billion of refunds, over enrolling customers without clear consent and making it hard to cancel.

    The lesson: A bundle keeps customers when they value it; keeping them by making it hard to leave invites regulators.

    Source 3: US Federal Trade Commission, "FTC Secures Historic $2.5 Billion Settlement Against Amazon", 25 September 2025 (opens in a new tab), checked .

  • Reliance Jio and JioHotstar

    IndiaToo early to tell

    Jio bundled a free 90-day JioHotstar streaming subscription with mobile plans of Rs 299 and above. JioHotstar reached 287 million subscribers during the 2025 cricket season (IPL).

    The lesson: Content that customers love can push them up to higher-priced plans.

    Source 4: Reliance Industries, media release on first quarter 2025-26 results, 18 July 2025 (opens in a new tab), checked .

How to recommend it in a case

Answer first, then the reasons with numbers, then the risk and the next step. Three sentences, said out loud.

I recommend launching the bundle at USD 30, because although it earns USD 1 less a month per customer, each customer is worth about USD 600 over their life against USD 433.

The streaming licence costs USD 6 a month, but churn falls from 3 to 2 percent, so customers stay about 50 months instead of 33.

Everything rests on the churn falling; next I would run the bundle in one region for three months and measure churn against a matched group.

The numbers to quote: Churn with and without the bundle; Cost of the added product; Lifetime profit per customer.

The figures in the answer come from the illustrative worked example above. In a case, use the client's own numbers.

Classic interview traps

  • Judging the bundle on monthly profit alone. The payoff is usually in churn.
  • Forgetting the licence or support cost of the added product.
  • Assuming customers like extra charges. Unbundling works when the base price is clearly lower.

Where it is common

Sources

Practise it

Where this move comes up in cases

Related moves