A Bundle Pricing Approach for Mobile Telecommunication Services: Method and Data Analysis

The bundling of goods/services is a technique many firms use to influence product demand, generate higher revenues, and enhance consumer surplus. In the telecommunications industry, offering incentive bundles of different mobile phone services is an effective technique to reach such goals in a competitive market. This paper presents a bundle pricing approach for mobile services, which determines the optimal content of service bundles in terms of the type and number of services offered to different customer segments. The proposed model aims to maximize the total firm's revenue and total consumer surplus, as the main mobile service operator's objectives. The model recognizes differential pricing as a useful tool in revenue management. First, an efficient segmentation of customers in terms of their taste and willingness to pay for different mobile services is conducted using the k-means clustering technique. Next, to handle customer buying behavior, the customer reservation price is considered based on the customers' arrival rates and their statistical distribution. Finally, the bundles' content and prices are optimized considering the type and number of services offered to different segments. Our computational experiments using sample data show the effectiveness of the proposed model toward the improvement of revenue as well as consumer surplus.