Product Bundling

What is product bundling and why is it used in marketing?

Product bundling is a marketing technique that involves grouping up related or complementary products into a single unit and selling them together instead of selling individual products separately. These bundles are usually sold at a price that is lower than what the total price would be if each of the products were sold individually.

Product bundling is done to increase sales while reducing your marketing and distribution costs.

‍

What is the goal of product bundling?

The whole goal of product bundling is to influence and tempt your customers to buy multiple products together instead of just buying one product at a time. But while doing this you should make sure to bundle relevant and complementary products. Don’t bundle unrelated products together, or else your customers might just not be interested in buying them.

‍

What are the advantages of product bundling?

Here are the most significant benefits and advantages of product bundling:

Increase in average order value

This one is rather obvious, when you create bundles, your customers are enticed to buy the whole bundle, even if they originally intended only to buy the main product. This is because they believe that they are getting a better deal if even they only really need one product. 

When done right, product bundling can increase your average order value tremendously by getting customers to purchase more products together instead of just buying individual products. This ultimately leads to greater sales revenues and higher profits.

Reduction in Marketing and distribution costs

Acquiring new customers is a rather expensive activity. There’s a lot of resources required to get new customers and it’s far more expensive to find new customers than to sell to existing customers. Rather than marketing individual products or product lines, you can focus your marketing efforts on the main product and create bundles around it to sell the other products along with the main one. Since these products are bundled together, you’ll have to spend less on storage and distribution costs due to the fact that these products are all bundled together and do not need to be packed separately.

Less wastage of inventory

Opportunity cost is not the only cost associated with dead stock. You’ve also got to deal with holding costs to store this inventory till the point when you decide that it just isn’t going to sell at all and you decide to throw it out, discarding it as waste.

You can avoid this situation altogether by bundling slow-moving products with popular, fast-selling items and offering a small discount on the bundle. This would cause your customers to see the bundle as a good deal and buy it, creating a win-win situation where your customers get something extra at a lower price and you don’t have to deal with as much dead stock or inventory wastage.

‍

What are the types of product bundles?

There are 7 types of product bundles:

• Pure bundles
• New product bundles
• Mix-and-match bundles
• Cross-sell bundles
• Gifting bundles
• Inventory clearance bundles
• Buy-one-get-one bundles
  

Pure bundles

When retailers engage in pure bundling, the individual bundles that make up a bundle cannot be bought separately, they can only be purchased in the bundle along with the other items. It limits the choices available to customers. If the customer wants to purchase one product, they need to purchase the entire bundle, there’s no way around that.

New product bundles

This bundling technique is used when new products or new product lines are launched and customers need to be introduced to these products. These new products are bundled with products that have historically been selling fast and in high volumes so that the people who buy these products become aware of the new products and get to experience them as well when they purchase the product that they initially intended to buy.

Mix-and-match bundles

Mix and match bundling makes it possible for customers to choose among several similar products. It allows companies to give customers a choice of the products available and allow them to create their own bundles from the options available, kind of like going to an icecream bar and picking your own toppings. This bundling technique offers customers a sense of control over their purchases, which makes them value the items even more.

Cross-sell bundles

This bundling technique involves selling a complementary product as an add-on along with the main item. It is very effective with items that don’t cost much, and even when the main item needs accessories.

Imagine that you’re buying a cycle - the store might offer you mudguards, bottle holders, seat cushions, etc. as a bundle along with the cycle, these are essentially cross-sell bundles.

Gifting bundles

These are extremely popular during festive seasons. This bundling technique is targeted towards shoppers who are looking to gift a set of complementary items to a loved one.

Inventory clearance bundles

This bundling technique involves pairing slow-moving products with fast-moving ones so that you can free up inventory space and reduce your inventory holding costs. Discounts are usually offered on these bundles so that customers who want to buy the fast-moving products will see these bundles as a steal and purchase them.

Buy-one-get-one bundles

This is a bundling technique in which a customer gets a product for free or gets a discount on a product after they purchase another product. This technique is widely used for one-time purchases like electronics.

‍

How does bundling work?

Bundling works by adding value to your products by offering additional products at a discounted price, thus luring customers into purchasing the entire bundle rather than purchasing individual products. 

Why is product bundling effective?

Product bundling is effective because it manages to play on greed. This technique tempts customers by showing them that they are getting more value without needing to pay full-price for the add-on. 

Even if a customer came into the store with the intention to buy just a single product, a good bundle might cause them to pay a bit more and buy the bundle to get the add-on products as well.

This helps retailers increase their average order value and their total sales revenue while reducing their marketing and inventory holding costs.