The primary objective of any business is to earn profit and provide value to its customers. To achieve this objective, businesses resort to various marketing, production and distribution strategies.
Product Bundling is one such successful marketing strategy which encourages sales, promotes cross-selling and keeps customers engaged.
If you are interested in using Product Bundling as a marketing strategy to maximise value and profits, this article will take you through its noteworthy aspects and various strategies to adopt.
Product Bundling: Meaning
A marketing strategy in which two or more products or services are combined together to create a single package and then offered at a bundled price is Product Bundling. This strategy is a win-win situation for both the customer and the businesses.
Do note that though both terms are often interchangeably, product bundling is different from kitting.
The key features of product bundling are:
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Combining Products or Services - Products or services that are complementary, related or frequently used together are selected by businesses and packaged as a bundle under one SKU (Stock Keeping Unit)
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Single Price - The bundle is sold at a price which is generally lower than the sum of the price each product would have been sold individually.
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Value proposition - Product bundling creates a value proposition for customers which is cost saving and convenience of getting multiple products at the same time. This value proposition is communicated to the customer through various channels.
Product Bundling: Benefits
The benefits of Product Bundling are numerous and since it is a win-win strategy, both customers and businesses benefit from it. Let us discuss its benefits for businesses and customers separately.
A. Benefits For Businesses
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Higher sales volume - Product Bundling helps to boost sales as it encourages customers to buy more products and services and they perceive the bundle to offer them better value.
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Better inventory management - Managing and clearing inventory is easier with product bundling. You can promote the sale of slower-moving items along with popular products. It is helpful in clearing stocks and freeing up inventory space.
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Saving on marketing and distribution costs - Since the items sold together in a bundle are merged together in a single SKU, it becomes possible to market them together in a single go. It saves time as well as marketing costs and distribution costs.
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Enhances customer satisfaction - A successful product bundle conveys that the business understands customer needs and they feel appreciated and understood. It leads to enhanced customer satisfaction.
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Better product and brand awareness - The product bundle that a customer buys may contain a product which they have never tried before. This makes them aware of the new product and gives them a chance to try something which they would not have purchased otherwise.
B. Benefits For Customers
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Cost savings - A product bundle is good news for the customer in terms of cost savings. A customer can save money by purchasing a bundle at a lower price than buying the items individually.
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Convenience - It is convenient for the customers to buy a product bundle as it comes with the products which they would have otherwise bought separately.
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Less need for research - A product bundle contains products that are frequently used together and are complementary to each other. When a customer finds such a product bundle it eliminates the need to do research on their own.
- Try products and services - Customers are generally on the lookout for a particular product and then buy a product bundle that contains that particular product and other complementary products. Hence, they get access to and try new products and services which they would not have otherwise bought.
Product Bundling: Types and Examples
There are various types of Product Bundling techniques to group products together.
1. Pure Bundles
When products or services that make up the bundle are offered only as a bundle and not as standalone products, it is called Pure Bundling. The customers are not provided with any flexibility and can only avail of all the products or services.
Example: Microsoft offers applications like Excel, Word, PowerPoint etc. as a bundle in their Office Suite and these cannot be purchased individually.
2. Mixed Bundles
In Mixed Bundling, customers are offered an option to purchase bundled products or services together or they can buy them separately. This provides flexibility to the customer and caters to a broader range of customer preferences.
Example: A very frequent example of mixed bundling is that used by fast food restaurants. Combo meals offered by them can be purchased as a combo and the items can be purchased individually as well.
3. New Product Bundling
A product bundling technique in which a newly launched product is bundled along with an existing popular product. This helps the customer find out about the new product. The more successful the existing product is, the better received will be the new product to the customer.
Example: Generally gaming console companies bundle their new console along with older and popular accessories.
4. Build-Your-Own Bundling or Customised Bundling
As the name suggests, Build-Your-Own Bundling lets customers choose from among multiple similar products and make their own bundles. This makes the customers feel that they are in control of what they want to choose. Businesses can include products in a build-your-own bundle that they want to promote.
Example: Many eateries let customers customise their own pizza or salad by letting them choose their own crust, toppings, cheese, vegetable dressings etc.
5. Time-Based Bundling
This type of bundling is when businesses offer product bundles for a limited time. Holiday seasons and special occasions are when such a type of bundling works best. It creates a sense of urgency and stimulates sales.
Example: During Christmas or Valentine's week many gifting businesses offer gifts, cakes and flowers as product bundles.
6. Cross-Industry Bundling
When products or services from different industries are bundled together, it is called Cross-Industry Bundling. Such kind of bundling is often used in partnership marketing and can create unique value propositions.
Example: Many luxury hotel chains offer a complimentary luxury car on rent along with a stay as part of a weekend luxury package.
There are many other types of product bundling too apart from the above. These include Inventory clearout bundling, Gift bundling, Cross-sell bundling, Buy-One-Get-One bundling and many others. You can choose the one that suits you best.
Product Bundling: Strategies to Maximise Profits and Value
Now that we know various product bundling types, let us discuss the strategies that you can employ to use Product Bundling to maximise profits and value.
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Understand Your Customer
The foremost strategy should be to understand your customers, their preferences and needs, their purchasing behaviour and other related parameters that will help you to choose the right products to bundle together.
You can conduct market research and customer surveys to identify the products that are frequently brought together and will push your bottom line.
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Keep Bundles Nice And Simple
Do not overcomplicate and keep bundles nice and simple. Customers love simplicity and can be put off by complicated product bundles. Products included in a bundle need to make sense to the customer and they should be naturally inclined towards purchasing them.
Do not overload your product bundle with too much information which may be a turn-off for customers. They can also be given custom packaging option which makes them feel empowered.
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Create Data-Driven Bundles
The products to be bundled together should be backed by data and not on whims and fancies. From your range of products, you can look at what complementary products can be bundled together and which bundles will appeal to customers.
Based on the data, your bundles should contain products that your customers have been buying frequently and will need them repeatedly. This will ensure repeat revenue and not just one-time sales.
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Offer Bundles at various price points
It is a wise strategy to offer different bundles at various price points. This will ensure that your product bundles will cater to a wide range of customers. From the frugal to high-spending customers, you must include product bundles to appeal to every category.
The aim is to maximise revenue by accommodating a wide range of customers from budget-conscious to those seeking premium products.
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Show-Off the Savings
It is essential to clearly communicate to the customers the value proposition offered by your product bundle. Highlight the value that your customers will get such as cost savings, enhanced experience and convenience.
Use clear and compelling marketing messages to convey the benefits of your product bundling. If you have an offline business, place the bundles at strategic places such as near the payment counter or near the entrance to encourage quick-decision purchases. The product packaging of the bundled products also should clearly communicate the value proposition.
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Use Recommendations
Recommendations by existing customers work like magic for those who are contemplating buying those products. For product bundling as well, take advantage of recommendations and referral marketing to promote your products.
Recommendations are authentic, non-biased and appeal to potential customers. Ensure that your business website or social media pages highlight these recommendations for new visitors to notice.
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Ensure Smooth Order Fulfilment
Once the customer places an order for your Product Bundle, the job does not end there. It is imperative to ensure that the order fulfilment is smooth and the customers get their package in time. You need to offer them the best available delivery options so that it complement with the value which the product bundle has offered.
You can partner with a trusted 3PL to ensure hassle-free and smooth delivery. This will save you time as well.
Summing Up
As businesses continue to adapt to changing consumer preferences and bring out new innovations to maximise value and profits, marketing strategies such as Product Bundling prove to be a valuable tool for achieving these goals.
Product Bundling is an effective and versatile strategy to help businesses to boost sales, gain competitive advantage and enhance customer value. By understanding the benefits of product bundling, various product bundling techniques and how to strategically employ the techniques, companies can offer exceptional value to their customers.
Fulfilment of your product bundles is also an essential element of your strategy. You can get in touch with us to know how we can be of service in order fulfilment.