Tuesday, November 29, 2011

Complimentary Products

Starting out from the “G.E goes with what it knows: making stuff” I present an alternate view based on complementary products, bundling and cross subsidization. Consider Bajaj Allianz which is a joint venture between one of the largest life insurance companies of the world and Bajaj Auto, one of the biggest 2 and 3 wheeler manufacturers in the world. The partnership has been successful. Bajaj is able to cross sell vehicle insurance on its two and three wheelers.

Carefully planned, it does make sense for manufacturers of expensive items (vehicles, large electronic appliances etc) to provide financing/insurance services themselves or through a joint venture.

The three important strategies for industries that have complementary products are:

Control over complimentary products: (We offer both) this is the case like providing vehicle insurance/financial schemes with the vehicle.

Bundling: (We only sell both together) Providing laptops with built in operating system and software falls under this category.

Cross subsidization:(We sell one to sell another) This is the classic case of selling lead pencils (or pens) in order to be able to sell refills later.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.