Frequently it is advantageous to businesses to offer a group of products or services as a package, or "bundle." Bundles...
GMAT Reading Comprehension : (RC) Questions
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Frequently it is advantageous to businesses to offer a group of products or services as a package, or "bundle." Bundles of existing products act like new products in the marketplace but typically are less expensive and risky to create and require less time to introduce. Aggregation bundling is a market-expanding strategy that involves creating a bundle that will appeal to numerous customer segments, albeit for different reasons; the goal is to reach a large market and reduce complexity by marketing fewer separate products. For example, a credit card may include a wide variety of services, such as car rental insurance and a purchase protection plan. Even though it is unlikely that large numbers of subscribers are interested in all the available services, they all use the same card.
Loyalty bundling is another such strategy, where the goal is to expand sales by reducing a customer's incentive to sample and perhaps switch to a competitor's product. For example, a cereal company sometimes offers "variety packs," each with several different brands of that company's cereal. But whatever the bundling strategy, manufacturers must be careful to offer bundles whose value is perceived as greater than the sum of the individual components, to avoid the impression that portions of the bundle are wasteful. Additionally, manufacturers often benefit from continuing to offer specialized products separately (at a relatively higher price) to attract certain customers.
Ques. 1/3
The author mentions the example of a credit card that offers a large variety of services (see highlighted text) most probably in order to
Solution
1. Passage Analysis:
Progressive Passage Analysis
| Text from Passage | Analysis |
|---|---|
| "Frequently it is advantageous to businesses to offer a group of products or services as a package, or 'bundle.'" | What it says: Companies often benefit from selling multiple products together as one package. What it does: Introduces the main topic - bundling products/services Source/Type: Author's factual statement about business practices Connection to Previous Sentences: This is the opening sentence - establishes our foundation topic Visualization: Instead of Company A selling: Phone ($800) + Case ($50) + Charger ($30) separately, they sell "Smartphone Bundle" ($820 total) Reading Strategy Insight: Simple, clear opening - the author is easing us into the topic with a straightforward statement What We Know So Far: • Bundling = selling products together as packages • This is often good for businesses What We Don't Know Yet: • Why bundling helps businesses • What types of bundling exist • Specific examples |
| "Bundles of existing products act like new products in the marketplace but typically are less expensive and risky to create and require less time to introduce." | What it says: When you bundle existing products, it's like creating a new product, but it's cheaper, safer, and faster than actually making something new. What it does: Explains WHY bundling is advantageous (answering the "why" from sentence 1) Source/Type: Author's explanation of business benefits Connection to Previous Sentences: This directly builds on sentence 1's claim that bundling is "advantageous" - now we learn the specific advantages! Visualization: Creating truly new product: 2 years + $2M investment + high risk vs. Bundling existing products: 3 months + $200K + low risk = same market impact Reading Strategy Insight: Feel confident here - the author is helping by explaining the "why" behind the opening claim What We Know So Far: • Bundling = selling products together • Benefits: cheaper, less risky, faster than creating new products • Bundles function like new products in market |
| "Aggregation bundling is a market-expanding strategy that involves creating a bundle that will appeal to numerous customer segments, albeit for different reasons; the goal is to reach a large market and reduce complexity by marketing fewer separate products." | What it says: One type of bundling tries to attract many different types of customers (even though they want the bundle for different reasons). The goal is to sell to more people while having fewer products to market. What it does: Introduces first specific type of bundling strategy Source/Type: Author's definition and explanation Connection to Previous Sentences: This builds on our general understanding of bundling by introducing the first specific strategy. We're moving from "bundling in general" to "types of bundling." Visualization: Instead of marketing: • Product A (for college students) • Product B (for families) • Product C (for seniors) Aggregation bundling creates: • Mega-Bundle ABC (attracts all three groups for different reasons) Reading Strategy Insight: We're getting more specific, but it's still building logically on what we know What We Know So Far: • General bundling benefits • Aggregation bundling = one strategy that targets multiple customer groups What We Don't Know Yet: • Specific example of aggregation bundling • Other types of bundling |
| "For example, a credit card may include a wide variety of services, such as car rental insurance and a purchase protection plan." | What it says: A credit card that comes with car rental insurance and purchase protection is an example of aggregation bundling. What it does: Provides concrete example of the concept just introduced Source/Type: Author's illustrative example Connection to Previous Sentences: This is pure clarification! The author is making the abstract concept concrete with a real example. Visualization: Credit Card Bundle includes: • Basic credit function (appeals to everyone) • Car rental insurance (appeals to travelers) • Purchase protection (appeals to big spenders) = One product reaching multiple customer segments Reading Strategy Insight: Feel relieved here - this is simplification, not new complexity. The author is helping us understand aggregation bundling through a familiar example. |
| "Even though it is unlikely that large numbers of subscribers are interested in all the available services, they all use the same card." | What it says: Most credit card users don't care about every service in the bundle, but they all still use the same card product. What it does: Reinforces how aggregation bundling works by emphasizing the key point Source/Type: Author's elaboration on the example Connection to Previous Sentences: This restates the "different reasons" concept from the aggregation bundling definition using the credit card example. Visualization: Customer A: Uses credit card mainly for travel insurance Customer B: Uses credit card mainly for purchase protection Customer C: Uses credit card mainly for basic credit Result: All three buy the SAME bundled product Reading Strategy Insight: This is reinforcement, not new information - the author is ensuring we understand the core concept |
| "Loyalty bundling is another such strategy, where the goal is to expand sales by reducing a customer's incentive to sample and perhaps switch to a competitor's product." | What it says: There's a second type of bundling called loyalty bundling. Its purpose is to make customers less likely to try competitors' products, which increases sales. What it does: Introduces the second bundling strategy Source/Type: Author's definition Connection to Previous Sentences: This follows the same pattern as aggregation bundling - we get a definition of the second strategy type. The phrase "another such strategy" explicitly connects to what we just learned. Visualization: Without loyalty bundling: Customer tries Competitor A, then Competitor B, then Competitor C With loyalty bundling: Customer gets multiple products from Company X, less likely to shop around Reading Strategy Insight: We're seeing a clear pattern: the author defines strategy types, then gives examples. Expect an example next. What We Know So Far: • Aggregation bundling (+ credit card example) • Loyalty bundling (reduces competitor switching) |
| "For example, a cereal company sometimes offers 'variety packs,' each with several different brands of that company's cereal." | What it says: Cereal variety packs (with multiple cereal brands from the same company) are an example of loyalty bundling. What it does: Provides concrete example of loyalty bundling (following the established pattern) Source/Type: Author's illustrative example Connection to Previous Sentences: Perfect parallel to the credit card example! Same structure: definition → example. Visualization: Instead of buying: • Brand A cereal (might try Competitor X next) • Brand B cereal (might try Competitor Y next) Customer buys: • Variety Pack with Brands A, B, C (all from Company Z) Result: Less likely to try other companies' cereals Reading Strategy Insight: Recognize this pattern - we're getting the same helpful structure as before |
| "But whatever the bundling strategy, manufacturers must be careful to offer bundles whose value is perceived as greater than the sum of the individual components, to avoid the impression that portions of the bundle are wasteful." | What it says: No matter which bundling strategy companies use, they need to make sure customers feel the bundle is worth more than buying items separately. Otherwise customers will think parts of the bundle are useless. What it does: Introduces an important constraint/warning that applies to all bundling strategies Source/Type: Author's advisory statement about bundling risks Connection to Previous Sentences: The phrase "whatever the bundling strategy" explicitly refers back to both aggregation and loyalty bundling. This is a general principle that applies to everything we've discussed. Visualization: Good bundle perception: $50 + $40 + $30 items = $90 bundle (feels like $30 savings!) Bad bundle perception: $50 + $40 + $30 items = $120 bundle (feels like forced purchase of unwanted items) Reading Strategy Insight: This introduces what NOT to do - a key warning that applies to all the strategies we've learned |
| "Additionally, manufacturers often benefit from continuing to offer specialized products separately (at a relatively higher price) to attract certain customers." | What it says: Companies should also keep selling individual products separately at higher prices for customers who want specific items. What it does: Provides additional strategic advice about product offerings alongside bundles Source/Type: Author's strategic recommendation Connection to Previous Sentences: This builds on the previous sentence's advice theme. Both sentences are about "what companies should do" to make bundling successful. Visualization: Company offers: • Bundle: Items A+B+C for $90 (targets price-conscious customers) • Item A separately for $60 (targets customers who only want A) Result: Capture both market segments Reading Strategy Insight: This completes the advice section - we've moved from "what bundling is" to "how to do it well" Final Summary - What We Know: • Definition: Bundling = selling products together • Benefits: Cheaper, less risky than creating new products • Two strategies: Aggregation (appeal to multiple segments) & Loyalty (reduce switching) • Key principles: Ensure perceived value > sum of parts, offer individual products too |
2. Passage Summary:
Author's Purpose:
To explain what product bundling is, why businesses use it, and how they can implement it effectively by describing different bundling strategies and providing practical advice.
Summary of Passage Structure:
In this passage, the author builds their explanation in a logical, step-by-step manner:
- First, the author introduces bundling as a beneficial business practice and explains why it's advantageous compared to creating entirely new products
- Next, the author describes the first bundling strategy (aggregation bundling) and provides a credit card example to show how it works in practice
- Then, the author introduces the second bundling strategy (loyalty bundling) and uses a cereal variety pack example to illustrate this approach
- Finally, the author shifts to practical advice, warning companies about potential pitfalls and recommending that they also continue selling individual products separately
Main Point:
Bundling is a smart business strategy that offers multiple benefits, but companies need to use the right approach for their goals and make sure customers see real value in the bundles while still offering individual products for customers who prefer them.
3. Question Analysis:
The question asks us to identify why the author mentions the credit card example. We need to understand the purpose this example serves in the author's overall explanation of bundling strategies.
Connecting to Our Passage Analysis:
From our passage analysis, we can see that the credit card example appears in a very specific structural position:
- The author first defines aggregation bundling as a strategy that "involves creating a bundle that will appeal to numerous customer segments, albeit for different reasons"
- Immediately after this definition, the author provides the credit card example
- The author then reinforces the key point with "Even though it is unlikely that large numbers of subscribers are interested in all the available services, they all use the same card"
Our analysis shows this follows a clear pattern: definition → concrete example → reinforcement. The credit card example is specifically illustrating aggregation bundling.
Prethinking:
Based on our passage analysis, the credit card example serves to illustrate the concept of aggregation bundling - specifically how one bundle (a credit card with various services) can appeal to multiple customer segments for different reasons. The example shows how car rental insurance appeals to travelers, purchase protection appeals to big spenders, but they all use the same card product. This demonstrates how aggregation bundling expands the potential market by reaching numerous customer segments through one product.
Answer Choices Explained
A
illustrate the point that bundling strategies can be applied to customer services as well as to tangible consumer products
Why It's Wrong:
- The passage doesn't focus on distinguishing between services vs. tangible products
- This choice misses the specific point about aggregation bundling that the example illustrates
- The author's focus is on bundling strategies, not on what types of items can be bundled
Common Student Mistakes:
- Does this choice sound reasonable because the credit card involves services rather than physical products?
→ Focus on why the author chose this specific example in this specific location, not just what type of products it involves - Might students think this is about expanding the concept of bundling to different product types?
→ Remember the passage already established in the first sentence that bundling applies to "products or services" - this isn't new information
B
underscore the point that customers can become confused when presented with too great an array of services
Why It's Wrong:
- The passage doesn't suggest customers become confused by variety
- The example actually shows the opposite - customers successfully use one product despite variety
- This contradicts the positive tone about aggregation bundling
Common Student Mistakes:
- Might students assume that "wide variety of services" implies confusion?
→ Look at what the author actually says about the outcome - all customers "use the same card" successfully - Could students misread the complexity issue mentioned earlier?
→ The "reduce complexity" refers to marketing fewer separate products, not customer confusion
C
strengthen the argument that offering customers variety discourages them from sampling among competing products
Why It's Wrong:
- This describes loyalty bundling, not aggregation bundling
- The credit card example doesn't show customers being discouraged from sampling competitors
- This confuses the two different bundling strategies presented
Common Student Mistakes:
- Do students mix up the two bundling strategies?
→ Aggregation bundling = appeal to multiple segments; Loyalty bundling = reduce competitor sampling - Might students think all bundling strategies serve the same purpose?
→ The author clearly distinguishes between different strategies with different goals
D
question the assertion that aggregation bundling is always an effective market-expanding strategy
Why It's Wrong:
- The author presents aggregation bundling positively, not questioningly
- The credit card example supports aggregation bundling effectiveness
- The passage doesn't suggest aggregation bundling isn't always effective
Common Student Mistakes:
- Might students misinterpret the "warnings" at the end as questioning bundling effectiveness?
→ Those warnings apply to implementation, not to the fundamental strategy - Could students think the "different reasons" aspect shows a problem?
→ This is actually the strength of aggregation bundling - reaching diverse customer segments
E
illustrate how the bundling of products or services enlarges the potential market for the bundle by appealing to numerous customer segments
Why It's Right:
- The example directly follows the definition of aggregation bundling
- It perfectly demonstrates how one bundle appeals to multiple customer segments
- The credit card reaches travelers (car rental insurance), big spenders (purchase protection), and general users
Key Evidence: "Aggregation bundling is a market-expanding strategy that involves creating a bundle that will appeal to numerous customer segments, albeit for different reasons; the goal is to reach a large market" - followed immediately by the credit card example showing exactly this concept in action.
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