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"What works best: bundling or offering services à la carte? How do you offer products and services at their centers? What results have you seen?"

"A la carte works best."
Richard Nissen, Director - Europe, The Virtual Office
“Bundling services and sales packages may sound like a good idea but it never can be.

“No retailer bundles services if they can possibly help it, as you can have lower point of sales price by only selling the basic components as one product and then sell the extras separately.

“This enables the operator to increase revenues by charging for extra services without affecting the headline selling price.

“The first problem is that in an Office business center there are two incompatible and different revenue streams. The first component is the cost of space. This can be budgeted in advance and remains stable over long periods.

“If you bundle in the services such as telephony you are adding in variable costs that are not under the same control of the operator as the space costs.

“The other point is that if the space (office) market is under pressure you will be forced to negotiate discounts to match the offers by the market. Whilst you may be able to deal with this for your space you may find that the price of other services are actually increasing in price. This is certainly the case with your staff.

“Never give away items such as meeting room time. This is a limited resource and one that will be abused by your customers who will not value the resource and just “steal” it. You must charge for meeting rooms.”

Laurent Dhollande, President, Pacific Business Centers
“While bundling is a great way to promote simplicity, an “all-inclusive price” makes the cost comparison of rent between an Office Business Center (OBC) and a traditional office space less favorable to OBCs than it should be.

“Prospects are unfamiliar with OBCs. Their first questions are often “what’s the price?” and “how many square feet?” so that they can quickly perform a mental calculation of price per square foot. Skillfully answering this line of questioning is what can make the difference between providing great value to a new informed client … and scaring off an uneducated prospect!

“The key is to explain that the OBC's value resides in the pooling and sharing of costs required for any office infrastructure - costs that go way beyond just 'price per square foot' - under a very efficient economic model. The challenge is that our sales people don’t have much time to drive the point home.

“The problem with a bundled pricing approach is that a prospect will quickly perform a mental mis-calculation that results in a cost per square foot comparison that inaccurately appears multiple times higher than prevalent market rates in a traditional 'bare' office space. That difference is so stark that it becomes difficult to overcome the first negative impression just by walking them through the value gained with the free access to conference rooms, reception services, furnishing, T-1connectivity, dedicated phone and fax lines, answering services, access to admin support and IT services, not to mention flexibility in future expansion or contraction of their occupancy needs.

“By unbundling some of the value-added services from the rent like “connectivity”, we found it easier to demonstrate the value we provide, one step at a time, and we can ultimately present a compelling case of how Pacific Business Centers offers a lower total cost of ownership for their occupancy. It enables us to present a rent number that is not overly inflated with items that have nothing to do with rent, and to give our managers a better chance to bring the point of total cost of occupancy home. It also gives more choices. Customers like choices, even if a majority ends up choosing the same standard connectivity services.

“By separating the connectivity pricing discussion from the rent discussion we have made it easier for prospects to understand the value they receive, and for the OBC to be appropriately compensated for the services provided. As a benchmark, Regus’ current published Services Pricing in our area for the basic connectivity services most OBC clients ask for (phone system, phone line, fax line, T-1, free coffee, call screening, call patching, and answering services) adds up to $457/month for the first user in 8 separate line items. Presumably, if they bundled these services into an all-inclusive price their rental rates would be significantly higher. Realizing this may help ABCN members reverse-engineer more accurate apple-to-apple pricing comparisons and put Regus’ aggressive pricing approach on rent in a better perspective.

“There is value in presenting an all-inclusive price to the customer, as many OBCs do. It’s simple and customers do value simplicity. In fact we do provide bundles for our service and connectivity charges ourselves. But we believe we are better off in decoupling connectivity pricing from rent pricing, as a way to better educate our prospects and to receive pricing commensurate with the true value provided to our customers.”

"Bundling Works Best. "
Carolina Rondeiro, Owner – Darby Technology Centers , Coral Gables , FL
“Bundling works best for us because it's just different from what everyone else is doing.

“The client does like everything bundled so that there are no add-ons afterwards. Like I tell my clients, you go to a hotel and you know that your furniture is in there, and you know that whatever extras you use, like the mini-bar and long-distance phone calls – you know that will be added on to your bill. By bundling furniture and internet with their office space, clients then have control over additional services such as long-distance phone calls.

“For me, bundling is also best. When I increase the client's monthly fee, I'm not just increasing the officing price, I'm also including phone and internet.

“It's just good selling. People do like that, and people come back to me, asking why other centers do offer bundled packages. I do this for the reason of simplicity: for this certain fee this month, these certain products and services are what you know you're getting.”

Jerry Single, Owner – Partner, PS Executive Centers, Westlake, OH
"The other bundling that comes to mind is the inclusion of one to two hours of Administrative Services to cover the cost of delivering packages, unlocking offices, delivering faxes and FedEx packages. These stop the constant complaining that clients are getting nickeled and dimed, and at the same time allows the Center to recover the cost of the services we deliver.

"Additional bundling occurs on the Virtual Office side where up to 16 hours of conference room/day office time are bundled."

Katy O’Neill, Customer Service Director – Orega, U.K.
“The bundling services is becoming a major trend within ours and many other industries. Often cost reduction is a major driving factor, as many occupiers see service bundling as an effective way of receiving discounted pricing on the products and services they require.

“Alternatively, bundling services in to a simple package at one manageable price enables customers to effectively manage budgets and cap their spending over the course of the year.

“However, we can often get preoccupied with this concept, as for some customers offering fixed bundles of services can mean that they are regularly paying for products and services they don’t need or use which can then lead to resentment and poor customer retention.

“OREGA’s dedication to providing innovative support packages tailored to each of our customers needs causes us to regularly review the range of products and services we offer and how best to charge for them OREGA offers its customers a wide range of pay as you use services and where appropriate or on request we will bundle bespoke service packages to provide our customers with the products they need at the right price.”