Op-Ed: Bundling is alive and well—if providers know how to package their services

• The shape of service bundles may have changed, but they're still a valuable tool for customer retention, J.D. Power's Carl Lepper writes
• Internet service has become the center of the bundle universe
• TV bundles, in contrast, now appear to hurt customer satisfaction

Have service bundles gone the way of the rotary phone and destination television? Not if service providers can leverage consumer insights to properly build them.

For years, bundling television, home internet and landline or wireless phones proved a worthy investment for both consumers and providers. This symbiotic relationship offered consumers the convenience of a one-stop shop for their home entertainment and communication services. For providers, it was an opportunity to increase customer loyalty and revenue, offering incentive-based pricing to consolidate customers’ business and increase the total spend per customer in the process.

The world has evolved, and with it, demand for telecommunications services has shifted heavily toward a reliance on internet connectivity. In just two decades, the internet has transformed from a luxury item to a flat-out necessity for homes across the country. Meanwhile, the advent and subsequent explosion of streaming has caused consumer content consumption to become more disparate and niche, with many customers opting for a more à la carte, personalized approach to cable and wireless services.

While the landscape has changed, the art of bundling is still alive and remains an effective tool for customer acquisition. The problem is that providers are split on what types of bundles deliver the most customer value. 

Some believe the focus should be on the internet as the center of gravity for a bundle, others say cell phones. And even in a world inundated with streaming providers, there are some, like Altice and Dish, who are banking on a resurgence in video-centric bundling. 

According to J.D. Power data, it’s clear that the internet is winning the race right now when it comes to customer satisfaction, but will it stay that way, and will things change in the future? That’s still up for debate.

Internet and mobile: The perfect pair

The internet has become the new electricity. Over the years, internet service has become a baseline household necessity and, with the gradual move from cable television to an internet-dependent streaming model, that attitude has only become more engrained in the purchasing habits of consumers. As a result, most customers factor in the cost of internet service, and any bundle that is built on top of the internet is perceived as additional value and better savings.

This is particularly true when internet is bundled with mobile phone service. As consumers grow increasingly reliant on their mobile phones, building a bundle that can integrate mobile service can be a powerful driver of customer satisfaction. In fact, with the internet as the foundation, bundling with mobile phone increases Cost of Service satisfaction by 58 index points.

Mixed signals: TV bundles are hurting loyalty

While a significant portion of consumers have transitioned to streaming services, there are still plenty who are keeping their cable TV contracts. Whether that’s because some prefer a more passive television viewing experience (i.e., channel surfing over actively choosing to stream a specific show), or they want an exclusive regional sports network, or any reason in between, there are customers still opting for a bundle that includes television service. Unfortunately for those providers, those loyal customers are increasingly dissatisfied.

Nearly two-thirds (65%) of customers have TV bundled with internet. Notably, thought, those customers pay the highest prices for their bundles but have the lowest levels of customer satisfaction. When customers bundled their cable television service, customers have a satisfaction score of just 537 on a 1,000-point scale, higher than only landline phones.

It’s not hard to imagine why this is the case. As customers have launched an exodus for streaming, TV has largely been an afterthought for providers, and the customer experience reflects that neglect. But as customers start to slowly feel the burden of carrying multiple streaming subscriptions with prices that seem to increase consistently and unpredictably, it stands to reason customers may start to envision what the television landscape would look like if it were to re-coalesce around cable providers. The first provider that can figure out how to integrate a better, more satisfying TV service into a bundle could stand to reap huge benefits.

Bundling for the future

Bundling is still capable of offering plenty of value to customers, leading to increased customer retention. However, in an exceedingly brand-agnostic world, customers prioritize value, and providers need to strike the right balance.

When implemented strategically, product bundling can enhance customer loyalty by increasing perceived value and creating a more compelling overall offering. But the effectiveness is dependent on various factors, such as the specific products being offered, pricing strategy and market conditions. The providers that can understand and navigate these dynamics will stand to reap the benefits.