17 DEC 2019

Bundling partnerships: which business model to choose?

POSTED UNDER Bundling Digital Goods Mobile Marketing Streaming Subscriptions White Paper
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Mattias Liivak

Head of Marketing & PR, Fortumo

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By the end of the year, VOD providers have deployed over 540 bundling partnerships with TV providers and telcos. These kinds of partnerships are used for customer acquisition and subscriber growth not only by VOD-s but also other digital content providers, including music services and game developers.

Bundling partnerships give digital service providers a faster way to enter new markets because TV providers and telcos have something invaluable that service providers don’t:

  • Local know-how on the market specifics
  • Knowledge of the consumer demographics
  • Marketing channels to reach consumers
  • Established billing relationships with their customer base
  • Knowledge of the consumer’s identity for simplified sign-up

Digital service providers usually have a tiered pricing strategy, and the same approach can be used for bundling. Here are the different models of partnerships to consider.

Hard bundles

The bundled digital service is sold together for a fixed price with the TV provider or telco’s regular service pack to the user. An example offer in this case may be “Upgrade to PhoneProvider Plus Package, get 6 months of SportsVOD for free”.

The standard length of a free trial with such partnerships is 3, 6 or 12 months. And because the service is offered for free by the service provider, telcos usually give a minimum guarantee of new users budget to promoting the service.

Soft bundles

The bundled digital service is sold separately from the TV provider or telco’s regular service pack, but a special offer is available to the users. As an example, it could be “PhoneProvider Plus Package users: subscribe to SportsVOD and get 3 month access for the cost of 1 month”.

In case of soft bundles, the discount given to users is usually smaller than with hard bundles: free access for 1-3 months or at a significant discount such as 3-for-1 offers. Since service providers are giving out the service below retail pricing, some marketing commitment should be expected from the partner company.

Reselling (add-ons)

The service is sold separately from the TV provider or telco’s regular service at standard pricing, but the service can be paid for through the partner’s channels. Partners could pitch this as “Subscribe to SportsVOD through PhoneProvider and pay for it conveniently with your Premium+ package bill”.

No discounts or only light discounts are offered by the service provider, and the marketing is done at the partner’s discretion.

Reverse bundling

Flipping the partnership model on its head, reverse bundling instead has the digital service provider including the partner’s service for free as part of selling its own subscription packages. In this case, the offer could be: “Subscribe to SportsVOD, get 2GB of free mobile data from PhoneProvider”.

In cases of reverse bundling, digital service providers get discounted pricing for the partner’s service being offered as part of their subscription package, and can adjust pricing to make it profitable to convert new users through such an offer.

Which model to choose?

Since the technical effort of setting up bundling partnerships is roughly the same regardless of how many different offers are launched, our recommendation is to take advantage of this fact and launch multiple offers at once.

For example, a hard bundle can be set up for the partner’s best-selling service pack while for the rest of the user base, a soft bundle is offered.

Different types of bundle setups help achieve different goals. Hard bundles have a smaller audience but above average conversion of users. Soft bundles have a bigger audience but likely smaller conversion.

Reselling works in cases where service providers don’t have the capacity to launch new bundle deals but partners are interested in marketing the service on their side. Finally, reverse bundling is a great way to use attractive offers by partners (such as mobile data) by the digital service providers to convert their existing user base.

Fortumo’s Bundling Platform supports all the different setups and if you’re interested in learning how it helps you launch bunding partnerships in a scalable manner, download the white paper below.

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