Note 24: Bundle Components

Posted: 10 March 2007

Constructing a Product Bundle

Within a biller who uses them (and not all will), bundle construction should be a well-defined and understood process. This ensures the necessary steps are applied consistently for each bundle, and that each area of the biller's business obtains the bundle information it requires. As the biller develops new steps to its bundle process, or new business areas require bundle details, the bundle construction process should be extended, and then consistently applied using the new process steps.

When a bundle is constructed, core questions that define a bundle's operations include:

What products and services are included in the bundle?: This defines what is included in the bundle across one or more networks. e.g. mobile and fixed line phone calls. Elements excluded will be priced based on default (list) prices, or covered by other pricing arrangements (e.g. other bundles). The 'included' transactions and other charges will also be defined.
What will be charged for within the bundle?: This identifies the products and services that will be charged to the customer. Different bundles with the same product / service scope may choose to charge differently (e.g. based upon the amount of a monthly access charge). Charges may be 'in scope' of the bundle (e.g. local calls), but not charged for because they are 'included' within the monthly access charge.
How will it be charged?: What combination of recurring, non-recurring, and usage charges will be levied? against which products and services? The answers to this question will include proration policies for recurring charges (i.e. upon a recurring charge's start, end and modification).
What are the eligibility criteria?: Are there any criteria that a customer must fulfill to be offered this bundle? Are there exclusion criteria?
What are the incompatibilities of this bundle?: If the customer has existing products and services, whether bundled or not, are there any that are incompatible with this bundle's elements? Are there other bundles that cannot be sold with this bundle? This is a 'sociability' / 'compatibility' evaluation rather than an exclusion based on general eligibility criteria.
Is discounting applicable?: Based on the financial total of the customer's invoice, is there discounting to be applied? Bundles may use the existing ('a la carte') pricing structures and deliver whole-of-invoice and/or cross product line discounting as their benefit. This makes it attractive for the customer to spend more, and/or include more of their other spending on the biller's different product lines (e.g. mobile and fixed line phones, electricity and gas utilities)
How will purchases be recognised in the biller's financial systems?: Each charge will have corresponding financial postings. The value of a bundle's fixed monthly charge may need to be distributed across its component products and services. The manner in which this is done can directly impact recognition of revenue targets, and indirectly influence staff compensation. The biller's product managers will want to ensure that their sales targets are adequately recognised in the division of the bundle represented by the financial postings.
Does the customer incur a charge to obtain the bundle?: The customer may be levied a monthly charge for access to the 'benefits' of the bundle.
How will the bundle's be presented on the invoice?: Will the bundle be presented as a (monthly) consolidated charge, or as separate line items for each bundle component (with or without an amount specified against each)? Will some components be suppressed on the invoice (such as basic-level problem resolution)? Will usage that has been priced against the bundle's rates need to be separated or identifiably distinct from other usage (i.e. usage charges outside the bundle's scope)?

As well, there are operational questions to be answered, including:

What other applications need the bundle information?: Once defined, the bundle must be enabled by providing its details to different areas of the biller's business. These areas include ordering (so that customers can purchase the bundle), revenue assurance (to update the accuracy assessment of the billing process), distributed billing functions (if applicable, transaction rating, invoice preparation and EOM financials), and downstream reporting and analysis (e.g. data warehouse) to ensure that new values, such as the bundle name, are not rejected as invalid.
Does the bundle have system dependencies?: Can the bundle only be offered after specific software is released, or a new interface is integrated? What is the propagation rate of the bundle's details across the biller's applications? A propagation rate of a day (or less) is preferable to that of a week since the biller's responsiveness is limited by this rate of change.
When can this bundle be sold from, and until?: New bundles may be coordinated with a marketing initiative (e.g. advertising), or be kept secret for tactical reasons. The eligibility criteria in the ordering interfaces should use these dates to only make bundles visible after their designated starting date. A bundle may be available only until a specific date. The same ordering criteria need to exclude the bundle from purchase after the designated end date. Bundles already purchased would be unaffected, but no new bundles could be purchased by customers.
How can this bundle be updated / upgraded?: After it has been defined, a bundle may need maintenance to change the included products and services, or change the charging of existing products and services. If new products are added to the bundle and presented on the invoice, how will the biller avoid inquiries from concerned customers about the new entries? One approach may be to include a brief message on the invoice (or a separate insert) that explains the changes.

The answers to these questions need to be captured by the bundle construction process and made available to the biller's authorised staff, and in an understandable, and probably abridged, format to the biller's customers.

Tags: Billing, Bundles, Bundling, Charges, Pricing