Product Bundling – The Winning Pricing Strategy
What is product bundling?
Price bundling strategy, also product bundle pricing, is a strategy that retailers use to sell lots of items bundled together while providing consumers with a discount at the same time.
The benefits of having a product bundling strategy
Product bundling strategy has various advantages but can also have disadvantages, if not done correctly (we wrote about it here). The benefits of a product bundling strategy include:
- It helps you to improve sales of slower-moving products. If you pack them together with faster-moving goods, you can help to sell out the less wanted stock.
- It is an effective way to upsell and cross-sell products. You can increase the average basket value thanks to this strategy and steal the sales from your competitors, if customers buy all products from you instead of competing products from different stores themselves.
- It can bring you more sales than selling the same product without the bundle if the bundle is considered a bargain by customers who need or want the main product from the bundle.
- It increases convenience for the customers and they are more likely to spend a lump sum upfront, rather than purchasing items over an extended period of time and perhaps from multiple marketplaces or locations.
- You can get a higher initial return on the cost of acquiring a customer.
- As it drives bigger orders, it helps with the optimization of shipping costs and logistics for each order.
What products to bundle?
To create the right product bundles, you need to understand customers’ needs. What are they really looking for, and how can you give them more value with a bundle?
You can bundle complimentary items (e.g., a printer with cartridge refills) or the same types of items (BOGO) or items that are targeted at the same audience but are not complementary (e.g., a shampoo and a mascara). Here are a few examples of product bundles you can create:
Examples of product bundling
“Leader” bundling
This type of bundle consists of a more expensive, valuable to the customer product and a cheaper product(s) that are sold with the leader product at a fixed bundle price. An example can be “Buy a pair of jeans and pay $1 for any t-shirt of your choice” promotion.
Fixed price bundles
You can set a bundle price for the bundle. For example, “Buy a shampoo and conditioner from the same line for $10.”
Percentage discount on the bundle items
You can set a discount on the bundles. For example, “Any pair of bra and underwear gets a 20% discount.”
Dollar discount on the bundle items
You can set a fixed dollar amount discount on the bundle pack. For example, “Buy 2 perfumes for a $10 discount.”
Product bundles
You can set which exact products (SKUs) can be combined as a bundle.
Bundle collections
Create collection-based bundles where customers can choose similar products in multiples. For example, “Choose any two items from the socks category to get a 10% discount on the pack.” This gives lots of choices for your customers.
Buy X Get Y (BOGO style bundles)
This is a simple promotion, combining the same products together. Additional items can be included at a discount or even for free. For example, “Buy one cookie, get another one for free.”
Pure bundling
Pure bundling takes place when the individual products that make up the bundle are only made available when purchased as a bundle. The individual products cannot be purchased by customers separately. For example, a company may be selling internet plans subscriptions only with a router rental (not allowing you to use your own router).
Mixed bundling
Mixed bundling is the reverse of pure bundling, meaning that you offer the products both as individual products and in the bundle. This is a better strategy usually, as customers do not like to be forced to buy products in a bundle. Offering pure bundles can drive the sales down per individual product as compared to mixed bundling or even simply selling the products individually.
Upsell Bundles
Instead of proposing a newer (upgraded) or better product or service to your customers, you can offer an upsell bundle. For example, instead of simply offering a newer iPhone to your current iPhone users, you could offer a bundle of the newest iPhone with the cordless earphones.
Cross-Sell Bundles
This type of bundle uses complementary or supplementary items related to the main product being viewed by the shopper as add-on offers. Offering accessories and complementary products in a bundle with the main product is a better way to promote your cross-selling offer than promoting the same items post-purchase.
Occasional Bundles
Occasional bundling is a practice of putting a collection of products together based on basic necessities, celebration, season, or occasion. For example, you could offer a winter cosmetics set composed of a winter-themed shampoo, body lotion, shower gel and soap. Or a Valentine’s Day SPA package of two full-body massages, two face masks and two entrances to the swimming pool (for you and your partner).
Gift Set Bundles
Customers often look for inspiration when they are about to give gifts to loved ones and friends. This is a perfect opportunity for offering gift set bundles. You can create bundles for special occasions or for specific types of customers. For example, a bundle of cosmetics selection for women in their 20s, 30s, 40s and so on.
Flexible bundles (Mix and match bundles)
You can let your customers choose what they want to bundle together, for example by setting only the categories from which they should choose the products. An example of such a flexible bundle could be “Purchase a product from a women's clothing category and another one from a child's clothing category to get a 20% discount on the bundle of two products.” This gives plenty of choices for the bundle items.
Best practices of product bundling
Include a time limit on the deal
To instil some urgency in your promotion and convince customers to convert faster, you should put a time limit on your deal. Make it seasonal or short-lived. Remind your customers just before the promotion expires.
Clearly show the savings
Customers buy product bundles to save money. Show how much of a bargain they are getting by either specifying the percentage or dollar savings, as compared to purchasing the same products individually or from competition (if you are doing pure bundling).
Personalize and target the bundles
Personalized promotions are more attractive than miss-and-hit marketing promotions. Moreover, you do not want to overspend your budget by offering products cheaper (in a bundle) to customers who would buy the same products without that special discount anyways. Create customer segments, check their purchase history and target specific bundles at them. Send them personalized offers featuring products from the categories they usually buy from or cross-sell products you think they would be interested in based on their purchase history or other attributes. Put limits on your promotions to avoid abuse and fraud.
Be mindful of your profit margins
You want to be profitable with your bundled offerings. Make sure your offers are within acceptable margins. Monitor closely if you’re actually getting a good traction of the product bundle or not. See if there’s a negative impact on other products or the same product sales, after implementing the bundle. Tracking and optimizing your product bundles is a must of an effective product bundling strategy.
How to create product bundles?
Discount coupons
You can create your product bundle as a discount coupon promotion, requiring your customers to insert a discount promo code at checkout to use it. This is especially useful if you create personalized bundles that are not accessible to all customers or that have specific limits (for example, once per customer) and you do not want to require your customers to log in to complete the purchase (which would be needed if it was a cart-level promotion with such limits).
Cart promotions
You can also apply the promotion or fixed bundle price in the customer basket, without requiring any coupon codes. This makes sense if the bundle is publicly available and does not have any limits per customer.
Summary
Whichever of the product bundling strategies you choose, you will need a solid promotion infrastructure to launch, measure, and optimize such price discounts. Especially if you want to use promotion personalization. Moreover, you may want to add promotion stacking logic to your promotion infrastructure, for example letting a site-wide 10% off promotion apply also to product bundles. It can be a very lengthy process to develop such capabilities in-house. Voucherify is an API-first Promotion Engine that lets you create personalized product bundles and ship them omnichannel in minutes. We can help you launch product bundles quickly and put any limits to protect your budget.
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