1. Bundling Strategy Considering Product Diffusion Processes 褚志鵬 陳俞任 國立東華大學 企業管理學系暨運籌管理研究所 2015/6/231 中正大學經濟學系 演講

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3. when to bundle Bundling strategy Bundling strategy The firm hope to gain more profit How to price ？ Diffusion Model The diffusion processe s of the bundling product 2015/6/233

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5. Bundling strategy Bundling strategy Producer The scholars focus on the price strategy of the bundling, they set the optimal price not only using the basic of the economic theory but also the mathematical method (Adams & Yellen, 1976; Guiltinan, 1987; Eppen et al., 1991; Venkatesh & Mahajan, 1993; Robert & Hermann, 2000) Consumer The scholars focus on the consumers evaluate the processes of separate products or the preference of consumers behavior. (Varadarajan, 1985; Yadav & Monroe, 1993; Yadav, 1994; Yadav, 1995; Harlam et al., 1995) How to price 5

6. 2015/6/236 The scholars investigate the diffusion of multiproduct most only discuss the relative of the multiproduct (Gupta, Jain & Sawhney,1999; Kim, Chang & Shocker,2000; Shocker, Bayus & Kim, 2004) The multiproduct interaction on process of innovation diffusion (Peterson & Mahajan, 1978) The diffusion processes of the bundling product ？

7. Bundling strategy Bundling strategy Diffusion Model Hotelling’s model 2015/6/237

8.  Key papers of the model construct Delphine & Francis (1999) Persuasive advertising in Hotelling’s model of product differentiation Delphine & Francis (1999) Persuasive advertising in Hotelling’s model of product differentiation Jay (2006) Tying in two-Sided Market with Multi-Homing Jay (2006) Tying in two-Sided Market with Multi-Homing Bass (1969) A New Product Growth Model for Consumer Durables Bass (1969) A New Product Growth Model for Consumer Durables Multiproduct monopoly Tying=bundling Diffusion 2015/6/238

9.  Definition: “The Information about an innovation (or product) is transmitted through certain channels over time among the members within a social system,” by which the communication channels consist of both the mass media and interpersonal communications (Rogers, 2003)

10.  The communication channels, which are the process by which people develop and share the information about the product with each other to reach a mutual understanding within the social system, consist of both the “mass media” and “word-of-mouth.”

11. f(t): PDF F(t): CDF p: the coefficient of innovation q: the coefficient of imitation Frank Bass

12.  According to the concept of Bass diffusion model, the adopters of an innovation are categorized as: ◦ Innovators: the adopters who are influenced by mass media ◦ Imitators: the adopters who are influenced by interpersonal communications. proportion of innovator (due to mass media) proportion of imitator (due to word-of-mouth) market potential

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14. Multiproduct monopoly Firm 1.Pure components strategy Single product a Single product c 2.Pure bundling strategy Bundling product B Firm 1.Pure components strategy Single product a Single product c 2.Pure bundling strategy Bundling product B Consumer 1. Buy a, c, or B 2. If buy a or c, will not buy B Consumer 1. Buy a, c, or B 2. If buy a or c, will not buy B a a B B c c 2015/6/2314

15. buying single product a buying single product c buying bundling product B The common valuation for multiproduct The price for multiproduct The cost of buying multiproduct from consumer’s ideal choice The coefficient of price from bundling product B 2015/6/2315

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17. 01 PaPa PcPc N a (1) N c (1) N B (1) xaxa xcxc n a (1) n c (1) NBαNBα naαnaα ncαncα n ap NaαNaα NcαNcα 2015/6/2317

18. Potential of consumers for multiproductInnovative factor of single productImitative factor of single product Potential of consumers for single product i 01 PaPa PcPc N a (1) N c (1) N B (1) xaxa xcxc n a (1) n c (1) NBαNBα naαnaα ncαncα n ap 2015/6/2318

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20. Model 1 : Market Equilibrium under multiproduct monopoly Object ： find the potential market Model 1 : Market Equilibrium under multiproduct monopoly Object ： find the potential market Model 2 : diffusion Model of Market Equilibrium Object ： find the timing point that the consumers will only willing purchase single product Model 2 : diffusion Model of Market Equilibrium Object ： find the timing point that the consumers will only willing purchase single product Model 3 : bimodal profit function model Object ： find out the profit what the firm earn in the different timing of bundling Model 3 : bimodal profit function model Object ： find out the profit what the firm earn in the different timing of bundling 2015/6/2320

21. productV Price (α=1) Price (α=0.9) d a800250 700 c600200 B1400450405 (α=0.9) X0X0 X1X1 n a (0.9)n c (0.9)N B (0.9)N a (0.9)N c (0.9) 0.36430.850.36430.150.48570.850.6357 (α=1) X0X0 X1X1 n a (1)n c (1)N B (1)N a (1)N c (1) 6/14 (0.4286) 11/14 (0.7857) 6/14 (0.4286) 3/14 (0.2143) 5/14 (0.3571) 11/14 (0.7857) 8/14 (0.5714) 大大大小小 01 PaPa PcPc N a (1) N c (1) N B (1) xaxa xcxc n a (1) n c (1) NBαNBα naαnaα ncαncα n ap 2015/6/2321

22. (α=1) N a (1)N c (1) 0.78570.5714 n a (1)n c (1)n a (0.9)n c (0.9) 0.42860.21430.36430.15 Productβγ a0.0030.2 c0.010.4 αTαT 10.9 TaTa 21.7220.13 TcTc 7.916.7 01 PaPa PcPc N a (1) N c (1) N B (1) xaxa xcxc n a (1) n c (1) NBαNBα naαnaα ncαncα n ap TcTc TaTa 2015/6/2322

23. The manufacture cost of single product i The management and marketing cost of single product i Cost coefficient of management and marketing 2015/6/2323

24. If T B ≦ T c then profit function 1 Pr a × Y a1 (T) + Pr c × Y c1 (T) + Pr B × N Bα × M A If T c ≦ TB ≦ T a then profit function2 Pr a × Y a1 (T) + Pr c × Y c1 (T) + Pr B × N Bα × M t － Pr B ×{Y c1 (T) － Y c1 (T c )} TcTc TaTa If T a ≦ TB then profit function 3 Pr a × Y a1 (T) + Pr c × Y c1 (T) + Pr B × N Bα × M A － Pr B ×{Y c1 (T) － Y c1 (T c )} － Pr B ×{Y a1 (T) － Y a1 (T a )} naαnaα ncαncα PaPa PcPc NBαNBα 00 TaTa 2015/6/2324

25. accumulated profit trend in the profit function 2(δ=1) Productβγ a0.0030.2 c0.010.4 B0.0130.3 αTαT 0.9 TaTa 20.13 TcTc 6.7 productV Price (α=0.9) d a800250 700 c600200 B1400405 2015/6/2325

26. T B =8 T B =12 2015/6/2326

27. T B =16 T B =20 2015/6/2327

28. TBTB Ultimate profit(10^5) 83.38 123.21 163.50 204.16 α =0.9 δ =1 2015/6/2328

29. α=0.9 α=0.8 2015/6/2329

30. δ =0.4 δ =0.8 2015/6/2330  If the cost of management and market in the bundling product B is low, then the optimal bundling time is the former critical time point.

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32.  We proposed a diffusion process of bundling product. With this process, the firm could find the optimal timing to bundle two products at their life cycle.  Two critical time points are found. If the firm miss the first time point, the better strategy would be waiting for the next time point. 2015/6/2332

33.  Different critical time point of bundling ◦ Considering other factor  Stock, market strategy, finance of company  Comparing the profit diffusion process of bundling product B and unbundling 2015/6/2333

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