Product bundling is a powerful way to maximise revenues and profits in any business. Unfortunately for some businesses, higher sales can mean more activity and time spent, which can lead to burnout.
An issue with many businesses is that they offer individual products or services and miss out on the results that can be achieved by bundling their products into packages (product bundling). Offering packages increases the average customer value. So, one sale can make up for several sales of a single item.
Bundling effectively can be like installing a supercharger into your sales system.
Why Product Bundling?
Bundling serves multiple purposes:
- It boosts your average customer value (ACV)
- It can be utilized to move slow moving products (reducing inventory)
- It creates the perception of greater value in the eyes of your customers
- It has a positive effect on conversion rates (increased conversion rate x higher ACV = increased revenues)
Bundling is used by many businesses and we have all experienced this strategy. Fast food outlets offer bundling in the form of “meal deals” that package a meal with a drink and maybe a dessert for a small additional charge. Here’s how you do it.
Before You Bundle
If you have an existing business your first step is to review your customer database and sort your customers into perhaps three distinct segments. You can classify them as “A”,” B” and “C”.
An “A” type customer buys from you regularly and this segment may make up the bulk of your sales. They spend more per transaction (ACV) than the others, pay promptly and appreciate your products or services.
Check what your customers have bought in the past.
Compare their purchases to what products you offer. Have they bought all your products? If they have it might be time to develop new offerings.
What are the most in demand products?
Is there a service that can be attached to a physical product such as support, training, or accessories?
The idea is to identify associated products or services that can be assembled to create a package that is more appealing than buying just the base product.
Product Bundling Pricing Basics
Knowing how to price your product bundle requires you to investigate what each of your products or services cost you to create or deliver. Each of your products will have a material and/or labour cost component.
For example, a mechanic would know how much the parts for a car service would cost and the time taken to perform the service. There would be a markup added to the service price to ensure a profit is made.
If the service is offered at $200 then the mechanic knows he can offer a bundle of the service plus and extra complimentary engine degrease for $285. The degrease labour and material may only cost $30, but the transaction value has jumped to $285.
Adding low cost labour services or slow-moving product lines as part of the bundle can build the value to the customer.
Bundling is a great way to kick start sales and generate lots of prospect/customer interest. Rather than offering single services or products, create value and differentiation by building irresistible packages.
Bundling options can include:
- Identify products that can be used together to produce an even more appealing outcome
- A popular product offered with a slow moving or low demand product at a discount
- The most popular products/services bundled together at a small discount will produce higher sales
- A product bundled with an additional service such as support, training, or the best way to use accessories
The types of bundles you can offer are limited only by your imagination and level of knowledge of your customers issues and problems.