This product bundling article is a collaboration piece with Laura Gayle. Laura is the founder of Business Woman Guide, the trusted resource for women trying to start or grow businesses on their own terms. She is a full-time blogger who writes for major software companies, tech startups, and online retailers.
We’ve all done it: ordered a combo meal at a fast food restaurant because it was just simpler to ask for a “number five,” or put more items in our shopping cart than we really needed because there was a “buy two, get one free” promotion. Product bundling is a smart way for businesses to increase sales, and it works just as well (or better) online as it does in brick-and-mortar stores.
E-commerce businesses generally have a lot more information about prospective buyers than typical retailers. This enables them to personalize landing pages and offers. Without the constraints of shelf space in a typical retail store, e-commerce businesses can offer customers a nearly infinite variety of items. However, too many options can quickly overwhelm shoppers. Product bundling simplifies the purchasing decision for first-time buyers and makes it easier for savvy marketers to upsell complementary and related products.
We’re all very familiar with cases of successful product bundling—just consider software bundles like Microsoft Office and Adobe Creative Cloud. Then there are companies that use e-commerce to sell bundles like Play! by Sephora, The Running Buddy, and Nic Harry. Practically every cable and internet service provider successfully sells bundles, such as Comcast and AT&T. These brands have put bundling at the heart of their brand story, and they back it up with marketing strategies and systems that are fully aligned to deliver on the benefits of bundling for their customers.
Yes, product bundling has the potential to be a compelling transformational strategy, especially when combined with a simple and emotional brand story. But sometimes, it can backfire on you. Just consider the story of Nintendo Game Boy, and how they discovered that customers actually value bundles of products less than stand-alone offerings.
So, you need to proceed with caution when it comes to bundling strategies. Let’s look at seven ways bundling helps online sellers group products together to boost perceived value, increase sales, and turn over inventory faster.
Benefits of Product Bundling
Customers are sometimes presented with bundled offerings through online ads or email campaigns. But the most common method—pioneered by e-commerce giant Amazon—is to offer bundles at the “add to cart” and checkout stages. Below are seven of the top benefits of product bundling:
- Enhance the customer experience. It gives customers an opportunity to choose products and services grouped with their needs in mind. Then letting them remove, add, or edit products from base bundles can make the end result even more satisfying.
- Relieve the pressure of decision making. Shoppers like choices but become overwhelmed when there are too many decisions to make. Top online retailers set up tailored recommendations using sophisticated product-customer matching algorithms which direct clients toward choices that meet their needs. This convenient tactic relieves decision exhaustion and helps you close the sale.
- Improve customer confidence. Customized bundling makes the shopper feel invested in the decision and increases the likelihood of a sale. It also boosts return business rates, since the customer is likely to return to a company that understands his or her needs.
- Help customers understand the products better. Customers have to review each product or set of products to decide on a bundle. This helps them understand what the products do and the different features and benefits of each.
- Enhance customer feedback. When customers direct their own shopping experience, you gain insights into the selection process. Use this opportunity to find out which products or services work, and adjust those that don’t. This constant feedback lets you tweak the shopping experience and improve your products.
- Increase revenue and average sales. Bundling helps you increase average order value, an important metric in measuring business success and growth. This strategy boosts total revenue by increasing the amount spent on each transaction. Sell bundled products to encourage clients to spend more and make informed business decisions based on customer preferences.
- Speed up inventory clearance. Inventory management is a large responsibility for e-commerce businesses. Do it right and produce bundling facilitates inventory management by moving stock. Calculate your inventory turnover to see which items are lagging. Clever bundling pairs consist of top selling products and less popular items with a larger inventory—then you can set a price that increases the appeal of the new package. Another successful strategy is to package certain quantities of a dead item at a reduced price that still turns a profit. Offering this exclusively to those who already purchased the product in the past increases the desirability of the bundle.
Product Bundling Tips to Boost Sales
Now that you understand the benefits of product bundles, it’s time to create your own. Follow these steps to identify and maximize product bundling opportunities:
- Study buyer purchase patterns. If you combine products that people already buy, you know the bundle will likely appeal to customers.
- A/B test different product combinations. Experiment with different bundles to see which offerings get the best results.
- Bundle overstock or less popular items with hot sellers at a discounted price. This can help you move inventory that is at risk of becoming stale. Take a look at your lowest sellers that are still great products. But be sure to offer genuine savings. Customers will see through it if there is no real value proposition.
- Use your expertise to pick other products that work well together. Customers will be grateful if you suggest pairings they might not have thought of or remind them of accessories or important add-on items they are likely to need.
- Allow custom bundling. Instead of just offering pre-built bundles, encourage clients to pick and choose accessories to base bundles. This dramatically increases the average order value. For example, if you bundle together cosmetics, such as base foundation and powder, you can let shoppers add eyeliner and eyeshadow at checkout to complete their makeover kit.
- Implement a ‘buy more and save’ campaign. Let shoppers save money by placing a bigger order at a discount price. This typically increases the order quantity on future sales as well. A smart way to implement this strategy includes a minimum spend threshold over which a discount or tiered discount kicks in.
Make your Customer the Hero
Bundling has become the gold standard in e-commerce thanks to an increased demand for personalized choices and shopping convenience. The good news is that it’s a strategy that massive, global businesses and small, local entrepreneurs alike can use to boost online sales.
There are an infinite number of ways to bundle products and even more ways to build a strategy that reflects that. So, how do you do it? Ultimately, the only way your product bundling strategy will be successful is if you focus on making the customer the hero. Customers want to feel like you understand their needs and frustrations. Companies that respond to that by offering thoughtful and convenient product combinations at a discounted price end up with higher profits and happier customers.
Done well, product bundling is a win-win that increases your revenue and keeps your inventory moving. But remember, bundling success relies on simplicity, clarity, and alignment of your product Story, Strategy, and Systems. You can learn more about how to create a simple Story, a clear Strategy, and fully aligned Systems that yield loyal customers and powerful Influencers in Dave Sutton’s new book, Marketing, Interrupted.