The Ins and Outs of Bundles

You’ve seen it at fast food restaurants. You’ve had it thrust upon you at car dealerships. You’ve accepted it as the norm for cable providers.

I’m referring, of course, to the bundle.

“Bundling” is the term for taking multiple products or services and combining them together to offer them as a package. Bundles are usually sold for less money than the total cost of the items contained within (though not always), and can be a great way to boost sales.

Or, they can frustrate customers and cannibalize sales.

So should you bundle, or should you keep things a la carte?

Advantages

Bundling can a very effective sales strategy. In its simplest form, a bundle where two or more products are offered at a discount together when compared to their prices individually provides immediate value to the consumer. It’s the old “buy more and save” or “buy one, get one” strategy. Consumers get the items at a lesser price than they would have without the bundle, and you increase sales by having made your products more desirable.

Variations on this basic technique can be used to create “special” packages, such as gift bundles or promotional bundles.

An especially effective bundling technique involves pairing a brand new product with an older product to increase interest in the new product. Alternatively, you can bundle two older products together to try and increase their appeal, which can be helpful in clearing out older inventory.

These techniques can provide several advantages over selling products individually, including an increase in sales, which can mean a spike in revenue.

Disadvantages

Unfortunately, bundling can also be a double-edged sword. Just as it increases the perceived value of the bundled products as a package together, so does it decrease the perceived value of each product individually.

In other words, if two discounted products are worth more together, then they must be worth less individually.

You can combat this by offering bundled products in bundles exclusively. But the risk then is that customers could get frustrated that a product they want is only available alongside a product they don’t want, at a higher price than they would be willing to pay for the thing they are actually interested in.

One of the other problems with bundling is that essentially, at its core, it usually involves a price cut. You may feel that the price cut is worth it since the upside is that you are moving more product at a faster rate, but a price cut is still a price cut, and it’s usually something you want to avoid.

When You Should Bundle

As mentioned above, bundling is a very efficient way to move more product, more quickly. So, if you have a reason to increase volume in order to hit a quota or clear out inventory of a certain product, for instance, bundling is a great way to accomplish those goals.

Bundling can also be effective for those looking for a quick spike in sales numbers, but can also be a great promotional tool. Whether or not you decide that bundling is a good regular practice for your specific business, there are way more opportunities to use bundling for promotional purposes. Advertising a special, limited time bundle can created excitement around your store, or a new product, or even an old product.

Along the same lines, cross-promotional bundling is another great advertising tactic, where you can work with another brand to bundle products together and create a mutually increased exposure.

When You Should Not Bundle

Part of knowing whether or not creating a bundle is a good idea for your business involves really knowing your customers, and how they perceive your company and your products.

If your business is looking for a prolonged increase in revenue, bundling may or may not be the best solution. Companies like McDonald’s have had great success with offerings like “extra value meals” on the one hand, whereas a company like Nintendo has ended up cannibalizing sales of their own products by bundling video games and gaming systems together. They key is knowing your audience and what they will respond to.

Bundling is probably also not a great idea if you are offering premium products. Premium products should always be shown in the best light, with the highest perceived value possible to customers. If a premium product is then offered at a lower price in a bundle, it lowers that perceived value, therefore making it less premium.

Creating product or service bundles can be a very effective sales tool and strategy, but like so many other strategies, it is going to be effective in certain situations and less effective in others, right for certain companies and wrong for others. But if you have the appropriate expectations for a bundling strategy and employ it with an educated understanding of your customers, bundling can be used to great success.

10twelve can help your company find the ins and outs of bundles. Chat with us toady!