(Last updated May 13th, 2017)
Looking for a way to increase sales and revenues for your products or services?
Then product bundling is something you definitely might want to try.
By grouping products that naturally go together you can increase your average order value, gain new customers, and increase revenue and profits – without spending a dime.
What is product bundling?
Product bundling is where you take your products or services and package them together to sell as a single item or “bundle.”
These bundled (or grouped) products might be items you currently offer individually, or they may be entirely new services that you create to help add value.
It differs from cross-selling and upselling because you are presenting your products or services as a package deal together from the outset.
Here’s an example from an industry that is remarkably good at all three – fast food restaurants:
“Would you like to Super-size your meal for $1?”
“Would you like fries with that?”
- Product Bundling
“Would you like to try our combo that includes fries and a drink for only $5?”
The three aren’t mutually exclusive and you can certainly use them in combination with each other.
All three are powerful because they are encouraging a purchase of something someone already wants to buy – we’re just trying to increase the order value.
Some examples of product bundling:
Nearly any type of business or industry could benefit from bundling products together.
Whether you’re a travel company selling vacation packages or a software company with digital products, you can put this strategy to work.
To help get the gears turning on how this could be applied to your business, here are a few examples:
It seems as though the ever-growing list of features and services included with Amazon Prime keeps getting bigger by the day.What initially began as free shipping, now includes a dozens of features and benefits:
- Free shipping
- Video and music streaming
- Photo storage
- Special deals and discounts for members only
- Digital reading
- and more things keep getting added all the time
Microsoft’s Office Suite
While you can buy PowerPoint, Excel, Word, and the other software individually – Microsoft’s bread-and-butter is their “suite” of products. They’re all bundled together for you in a deal that doesn’t make much sense to not buy when you price each out individually.
Whether you’re looking at all-inclusive vacations that include meals, lodging, and activities or air+hotel packages that are discounted when packaged together – the travel industry definitely takes advantage of the bundling strategy.
It’s a strategy my travel company incorporates successfully for vacation packages, shows, lodging, and things to do together.
Fast Food Restaurants
As already mentioned above, the fast food industry uses this to make customer choices simpler and increase their average order value.Their combo or value meals packaged together a burger, fries, and drink that is convenient and saves customers money.
Cable TV & media companies
Media companies have been doing it for decades. Whether they’re packaging together channels, phone, internet, or a combination of them all – they use it to increase their revenue by increasing the total amount customer’s pay each month.
Cell Phone Companies
When you sign up for service enticed by a massively discounted phone, mobile companies are using the product bundling strategy in one of the fiercest wars for customers of any industry.
All of these industries are offering packaged products together because it helps them gain new customers, retain existing ones, and increase their bottom line.
Why should you bundle products?
If you want to try to increase sales, revenue, and customers… then it really does make sense to offer bundled products.
It’s not necessary to have every product or service you offer in a package or grouped together, but it’s something I would definitely take a look at.
There are a number of reasons why you would want to bundle your products together:
1. Products packaged together have a higher perceived value
By bundling products together you can create a product that is perceived as very high value by your customers – which in turn, should boost your sales and orders.
When people are browsing (online or offline) and see a number of similarly-themed products for one low price, it makes sense for them to want to purchase them together for a discount.
Even if they might not have purchased everything in the bundle, the value is so great that it doesn’t make much sense not to purchase them in a bundle.
2. More products sold = more revenue
Bundling products will help you sell more stuff… for a higher price.
Imagine that you’re a landscaping company selling yard services.
Now, let’s say that you offer several different services and these are your top-selling among your customers, along with their margin of profit:
|Average Order Value (Mowing + Edging)||$80||$40|
Since most customers purchase services 1 and 2 (mowing and weedeating) your average customer has a profit of $40 ($25 for the mowing and $15 for the edging)
Realizing that your high margin lawn fertilizing isn’t being purchased as much as you’d like, you decide to incorporate a packaged strategy.
Your bundle might look something like this:
- Complete Lawn Care – Mowing + Edging + Fertilizing… only $99!
The customer is saving about 10% and you’re now generating more revenue because more people are purchasing more of your services.
With the new bundling, your new average order now looks like this:
|Fertilizing||$19 (discount price)||$16 (smaller margin)|
|Average Order Value (Mowing + Edging + Fertilizer)||$99||$56|
Giving you a new average customer profit of about $56, which equates to an increase in bottom line margin of almost 40% great than before you were bundling!
While you’re sacrificing some margin, it has a compounding effect once you multiply it across the number of customers you have.
3. Bundle products to gain (and retain) market share
Microsoft is a great example of gaining market share in the early days of computing by bundling Windows and Internet Explorer with new PC sales.
While it did raise antitrust case from the government, this move undoubtedly helped them gain and retain their market share.
It can also help set you apart from competition or when your products or services have become a commodity.
4. To offload inventory or promote certain products
If you have product that you need to get off your hands (and that you can’t give away for free), then selling it together with other items as a package (at a steep discount) is a great way to clear out some inventory.
Bundling specific products that you want promote extra can also be particularly effective way to boost sales of those individual items according to a study by Bram Foubert and Els Gisbrechts.
5. To increase conversion rates by reducing customer choice
By offering products together you can help reduce choices when customers are making a buying decision.
When you reduce the number of options, you can greatly increase the conversion rate – and turn more browsers into buyers.
Some effective strategies for product bundling
Grouping products doesn’t always work, however, there are a few tips that should help you create the best chance of success for your packaged products.
1. Discount the bundle
By far the most integral part of a bundled set of products is by offering a discount when they purchase the items together.
Your customers want to know that they are getting a deal by buying everything together.
2. Display the value and savings of what they’re purchasing
You don’t just want to discount, you need to let customers know that they’re getting a good deal.
Show customers the amount they have saved – in either percentages, dollar amounts, or both.
3. Include extra services or warranties
If you’re trying to boost sales, then packaging products with extra services or warranties is a great way to encourage purchasing.
Typically, these types of items have higher margins and lower costs allowing you to hopefully make up in volume what you’re missing on margin.
4. Include digital products
A very low-cost way to add value to a bundled group of items is by including some type of digital product.
You may have noticed this strategy in action if you’ve ever purchased a DVD that had an accompanying digital code for viewing online as well.
These types of extras can add value while being very low cost.
Whitepapers, future discounts, ebooks, and software are all things that have low fixed costs but can substantially add value.
5. Free personalization or customization
Some products or services have the ability to be customized to a customer’s needs.
If you can affordably offer this as part of a purchase, it’s a great way to generate some sales.
6. Offer products for sale individually as well
A study on product bundling was done by Timothy Derdenger and Vineet Kumar that showed that when you only offer bundles it actually hurt sales… by up to 20%!
So this means to be sure that you’re also offering products individually if you’re also offering them in a bundle.
Online Tools for Bundling Products
If you’re wanting to incorporate this into your online store, there are a few plugins and tools that can help you get started.
WooCommerce Product Bundle Plugins
If you’re using WordPress, there are several WooCommerce plugins that can help you out:
- WooCommerce Bundled Products – Allows you to create bundled products together on a single product’s page and even works with variable, simple, and downloadable products.
- WooCommerce Product Bundle – Allows you to bundle and discount products of your choice, with many different options for customizing to suit your needs.
If you’re running a store using Shopify, then you’re in luck – get product bundling up and running via a pre-built app:
- Product Kits – automatically update inventory and sell bundled products.
- Upsell Bundles – allows you to bundle and show how much customers save by purchasing items together, update inventory, and set discounts.
- Product Bundles – an app for bundling that you can use to create by either individual products or collections.
Wrapping Up & Takeaways
Product bundling, grouping, packaging (or whatever you want to call it) can definitely benefit your business.
The low cost of implementation, combined with the potential high returns make it a strategy nearly any business can implement and incorporate into their product or service offerings.
To be successful, I’d recommend trying a few different combinations and promotion methods to see what works for you.
Sometimes it takes some trial and error before landing on the ideal mix of products and promotion strategy – but it’s something that can definitely pay off in the short and long run.
I’d love to hear your thoughts and let me know, what do you think about bundling?
Is there anything you’ve done that really works or has been successful?