Would you like to streamline marketing efforts, encourage product exploration among customers, simplify the customer/staff experience, decrease marketing costs and staff time, increase your average order value (AOV) and take advantage of seasonal sales peaks? Then consider selling product bundles.
Bundling products can improve sales conversion rates by offering more options and more value to shoppers. Instead of seeking out and purchasing individual products, customers are offered a group of products that address their unique needs at the time of purchase.
Selling a bundle rather than a single product is an instant boost to both sales and AOV, so long as the bundle is well-designed and priced beneficially. The idea is that the bundle is sold at a lower price point than if the products were to be sold separately, offering increased value to customers and potential savings on their part.
Bundling benefits retailers, too. Bundles capture attention, whether shoppers are casual browsers or ready-to-buy customers. Staff time is also maximized, allowing staffers to show several products together, rather than search for and analyze individual offerings. Bundles even make great gifts for anyone who’s shopping for an enthusiast or a newbie who doesn’t know exactly what to purchase.
Bundling whittles down the decision-making process. The customer simply decides whether the bundle meets their needs, rather than having to evaluate the individual products. Bundles offer convenience and decrease the cognitive effort required to make a purchase.
Why Bundle
Bundles allow retailers to:
- Group products to boost overall sales and AOV.
- Move inventory quickly, whether to clear out deadstock or just make room for new products.
- Reward and encourage customer loyalty by offering great value.
- Decrease the potential for choice overload and help customers easily find and purchase complementary products.
- Take advantage of seasonal sales peaks, certainly centered on hunting seasons, but also holidays.
Bundling allows retailers to efficiently move excess stock by combining it with other items, which minimizes losses associated with unsold individual products while also creating perceived value for the customer.
No retailer wants to deal with deadstock and unnecessary inventory costs. Unfortunately, as much as 20 to 30% of a business’s inventory is obsolete at any given time. That’s a big statistic that could become the breaking point for a struggling organization. Even a healthy business feels the pain on the bottom line.
Although bundling seems like a simple concept, there are subtle factors at play that influence consumers on a psychological level, leading to increased spending and other benefits to retailers previously listed.
Experts break down bundles into four categories:
- Pure bundles offer products that aren’t sold individually and are only available in the bundle.
- New product bundles present a grouping of new products together with existing popular products to encourage customers to discover new items.
- Mix-and-match bundles allow customers to build their own bundle from a selection of different products, focused on use with the main item in the bundle.
- Cross-sell bundles combine complementary product(s) to the main item being featured.
Bundling Strategies
When developing product bundles, don’t expect immediate success. Getting the formula right takes a little time and testing. Bundling strategies, targeted marketing, and even psychology play a part in success. When bundling, focus on these strategies.
Group relevant products: The key to bundling is meeting customer needs and providing a great deal. You know what sells in your store, you know the brands your customers prefer, and you know the activities your customers enjoy. Concentrate on those keys when selecting products and building bundles.
Focus on tasks: This is certainly the easiest way to begin grouping products. A new deer-hunting package might include a firearm, optic, gun case, box of ammo, and game call. A camp meal bundle may include a camp stove, spices, a bottle of propane, and a knife. Imagine the task, pick the main item, and complement it with a few extras.
Emphasize savings and benefits: Don’t expect customers to realize the full benefit of the package from a user perspective or properly consider savings. Benefits include how the package meets the customer’s needs, while savings are just that. Highlight both to the customer.
Reward customers with discounts: Don’t just blindly place a discount on the bundle. Show the monetary benefit to the customer. How much do they save? Clearly show them with signage.
Allow personalization of the product bundles: Consider letting customers personalize their product bundles. In addition to the main item, give them a few choices of add-ons. For instance, if you’re selling a 20-gauge with a gun case and box of ammo, allow the customer to choose from a selection of cases and ammo. You might also consider allowing upgrades (say, a higher-quality scope for that rifle) at a modest discount.
Building and Marketing Bundles
A/B Testing: Testing different bundles (A vs. B) helps to establish what customers prefer. Use customer data to help build/select bundles that meet your customer’s needs, then offer two or perhaps three similar bundles to determine which is more alluring. Pay attention to reactions and purchases. Determine why customers buy one bundle over another.
Create diverse product bundles: Offer something for everyone. What are your key customer segments? Deer, turkey, upland game hunters? Families? Clays shooters? Focus on your key customers and serve them all.
Target groups: Customer buying data is a key to all sales growth. Selling a bundle, no matter how appealing, will fail if it’s not customer-centric. Your bundles should contain products that your customers have purchased before and are likely to need again, as this ensures repeat revenue rather than one-off sales.
Focus marketing campaigns: Initiate campaigns for each bundle, rather than promote all bundles in one campaign. Focus campaigns on specific customer groups and/or tasks. Campaigns often have a seasonal bent, too.
Sell the sizzle: In the past, we’ve talked about the practice of selling benefits, not just features. It’s important because customers want to know the products they’re purchasing solve the challenges they are facing. Benefits are not product features. They are the elements that fulfill the customer’s needs. A turkey hunter’s comfort bundle might include a chair, a new box call, a head net, and gloves. What are the benefits? The customer can sit more comfortably for longer periods, be well camouflaged, and try some new calling techniques — all keys to enhanced enjoyment and turkey hunting success.
Determine pricing: Calculate the best price for your product bundles by figuring out the gross margin of each bundle item. Next, determine how much of a discount you can offer on the bundles. Experts suggest that if average margins are more than 50%, then the bundles can be discounted at 10% to 20%. When a business’ average margin is less than 50%, then it is best to offer a discount of 5% to 10%. If you are unable to offer attractive discounts, you need to highlight the bundle value and, most importantly, the benefits.
Psychology of Bundling
The perceived quality of a bundle can also be adjusted up or down depending on the actual items included in the bundle.
A study titled “The effects of price bundling on consumer evaluations of product offerings” from researchers at the University of Michigan Business School, Johannes Gutenberg Universität and Universität Mannheim discussed the phenomena of averaging, anchoring, and adjusting:
- Averaging: Consumers look at a bundle of products and their ratings of each component are averaged or balanced into an overall evaluation (Gaeth et al., 1991).
- Anchoring and adjusting: Buyers tend to anchor on the most important product in the bundle, then adjust their evaluation by taking the less important items into account (Yadav, 1994).
It’s worth noting that, especially when selling high-value items, these phenomena can bring down the perceived quality of a product. Consequently, sellers must be careful which items they choose to bundle. Adding more items that are perceived as lower quality will bring down the perceived average value and therefore the overall value of the bundle. More is not always better.
“You’ve just fallen victim to a phenomenon that psychologists have recently discovered (Weaver, Garcia, & Schwarz, 2012) called the ‘Presenter’s Paradox,’” writes Heidi Grant in Harvard Business Review. “It’s another fascinating example of how our instincts about selling ourselves, our company or our products can be surprisingly bad.”
Customers don’t add up the impressiveness of a bundle. Psychologically, they average it. They look at the whole package, rather than focusing on the individual parts. Thus, highly favorable items are diminished or diluted in the eye of the beholder when they are presented in the company of only moderately favorable items.
The presenter’s paradox is clear when considering an expensive bottle of wine. Let’s say you buy two $5,000 bottles of wine to give to two different clients. To one, you give the bottle by itself. To the other, you give the wine with a set of plastic cups. Although the actual monetary value of the second gift is higher, the perceived quality is lower. No one drinks $1,000 glasses of wine from cheap plastic cups.
Nope, product bundling isn’t as easy as throwing three or four products into a bag at a discounted price. Lots of factors come into play. Take time to learn more about bundling and experiment with what works in your store and what doesn’t. When done right, bundling will be beneficial to you and your customers.
Learn More About Bundling
Nope, product bundling isn’t as easy as throwing three or four products into a bag at a discounted price. Lots of factors come into play. Take time to learn more about bundling. The more knowledge you have, the more beneficial bundling will be to you and your customers.
We pulled together a list of a few great articles on bundling that expand on the basics we’ve covered. Some cover retail and/or online sales, but all are relevant to you.
- Faster Capital: Common Mistakes To Avoid In Product Bundling And Price Anchoring https://fastercapital.com/topics/common-mistakes-to-avoid-in-product-bundling-and-price-anchoring.html
- LinkedIn: Everything You Need to Know About Product Bundling to Increase Sales and AOV https://www.linkedin.com/pulse/everything-you-need-know-product-bundling-increase-sales-macdonald/
- Qualtrics: Product Bundling 101: Guide, Strategies, and Example https://www.qualtrics.com/experience-management/product/product-bundling/
- Shopify: What is Product Bundling? Examples and Benefits (2024) https://www.shopify.com/retail/bundling-for-retail
