Product bundling is a gold-standard practice for e-commerce businesses today, whether you’re a start-up or a large, established business. It’s a strategy driven by value perception and the demand for shopping convenience and personalised choices. For a merchant, bundling increases not only your average order value, but also your number of new and repeat customers.

What is product bundling?

Product bundles are essentially package deals made up of at least two items, sometimes more. The products involved are usually complementary to each other or, less frequently, they might be similar items. The bundled products are sold together at a discount compared to what the customer would pay for them individually. (Note that when merchants offer more than one of the exact same product in a packaged deal, then it’s referred to as a ‘multipack’ rather than a product bundle.)

The psychology of product bundling

Product bundling works by creating two perceptions for the customer: convenience and good value for money.

Convenience

From the consumer’s point of view, product bundling makes shopping extremely easy and convenient. When you present them with either a ready-made or a customisable bundle, they don’t need to spend extra time and energy thinking about what else they might need and then searching for it.

Good value for money

Bundling essentially reduces the “pain of paying”. These days, customers have access to almost unlimited information online, which in many cases makes it easy for them to compare prices. This is very useful but it also increases the pressure to find a good deal.

Bundling addresses this in two ways:

• If the customer does know how much they would be paying for the individual items, and it’s clear they will be paying less in total for the bundle, they feel they are getting a bargain.

• If they don’t know how much the individual items would cost (i.e. the prices are ‘opaque’), it’s impossible to judge the value of a bundle against the individual items. Ironically, this frees them up from having to make that call and they more easily part with their money. This is particularly true in some industries. For example, if you are buying a luxury car, the salesman doesn’t itemise how much you are paying for the leather-bound steering wheel and the custom trim. You simply pay for the ‘luxury interior package’, which includes those features and more.

Either way, bundling closes the deal. By being creative in your bundling, you drive the perception of receiving a discount, without becoming discount driven or even experiencing a major impact on your profitability.

Is product bundling right for your e-commerce business?

Certain types of businesses are very well suited to bundling, while others may not be. To find out if it might work for you, look carefully at your analytics and your customer personas. Ask yourself the following questions:

1. Do you have customers who would value a product bundle due to its convenience and/or price advantage?

2. Do you have customers who often buy certain items together – or might they be persuaded to? For example, think about someone who wants to start camping. They’ve never done it before and need advice on what to buy, so bundling a camping starter kit could be very helpful to them.

3. Do certain products naturally complement each other?

4. Do you have a new or little-known product you want to introduce to your clients?

5. Do you have products that don’t sell well on their own, but will definitely sell if combined with a complementary product? Fast food restaurants are an excellent example of this. A side of chips is a huge seller in a KFC or McDonalds – but it’s hardly ever bought on its own.

6. Do you have lower-priced products that could increase the overall value of the package if they are bundled with something more valuable? Just be careful if you are pairing expensive and inexpensive products (see more on this below).

7. Do you have dead stock you want to move instead of sending it back to the supplier? This is a way to correct an inventory mistake – as long as you never disappoint your customer by giving them old or inferior products in a bundle.

Benefits of product bundling for your business

Providing great value to your customers is always going to create customer loyalty, which pays long-term dividends for your business. Your financials benefit in many other ways too, for example:

• Revenue: You increase your average order value (AOV) because the perceived value tempts customers to spend more money than they planned (while still feeling like they’re getting a bargain).

• Profit: Selling multiple products in one solution means a greater initial return on the cost of acquiring a customer.

• Wider sales: When you bundle well-known items with lesser-known ones, you broaden your customers’ awareness of your product offerings. They may then buy more products from you in future, rather than going to your competitors.

• Inventory management: Bundling is a great way to get rid of older or less popular products that might otherwise take up space in your warehouse or eventually have to be written off as dead stock.

• Trust: Curated recommendations can build or enhance the relationship between the merchant and customer.

• Differentiate: If done well, with creative flair and innovative thinking, product bundling can really differentiate you from your competition.

Best practices for product bundling in e-commerce

Make sure you follow these important guidelines to get the most out of your product bundling strategies:

The products you bundle should naturally fit together

A bundle could be a collection of items that complement each other, for example, a cellphone with a protective cover and headset, or a braai with charcoal and braai tongs. Just make sure all the items are of similar quality, or you may decrease the perceived value of the bundle.

Test your bundles if you’re pairing expensive and inexpensive items

Research published in the Harvard Review shows that bundling expensive and inexpensive items together doesn’t always work. Pepperdine researchers Alexander Chernev and Aaron Brough cited an example of a home gym which sold much better alone than when combined with a fitness DVD. Likewise, if a luxury hotel charges R20 for a 500ml bottle of water, guests feel ripped off. But if the hotel room price is raised by R20 and the water is included, the ‘free’ water feels like a really nice touch. It all comes down to the perception of value.

The price of the bundle should be lower than the sum of the individual parts (if all the prices are known)

If the customer can research prices of all the individual parts of your bundle, then the discount they are getting by buying the bundle needs to be very clear to them. Show them exactly how much money they will save on every bundling option.

Focus on benefits and not price

If price-based bundling presents problems for your business for whatever reason, then avoid price comparisons by refocusing your bundle marketing to highlight other benefits. For example, if you sell phones and phone accessories, you could highlight convenience and improved device performance as the primary benefits of bundling.

Beware of cognitive load

Cognitive load is the amount of mental energy it takes to complete a task – in this case for the customer to understand the bundle. High cognitive load can make the customer’s decision more difficult, leading to inaction or exit. So, your bundles need to be easy to understand and make intuitive sense.

Selling the bundle needs to be worth your while

As you’re selling the bundled items at less than their usual individual prices, your profit margins will be lower. The extra sales and higher AOV should more than compensate but don’t assume that. Be rigorous about running your numbers. The key to making product bundles work is symbiosis i.e. your bundling strategy should benefit both you and the customer.

Use bundling as an opportunity to demonstrate your expertise

Think about how you, as an expert in your field, can provide guidance to a customer who may be a novice. For example, someone who is just starting their own plumbing business and needs tools, or a person who has decided to start brewing beer at home. They might not be aware of everything they need, and your bundle can educate them while also saving them money.

Let your customers custom bundle

Research done by Timothy Derdenger and Vineet Kumar showed that when companies gave customers the option to purchase products as a bundle, sales went up. However when customers were forced to buy a fixed bundle, instead of being given the choice to mix and match, sales went down by 20%.

At Comalytics we have a plug-in that can help you set up your bundles, and then allow your customers to alter them to suit their needs. This works well for book lists, gift bundling, starter kits and so forth. Our product bundling plug-in is easy to implement and if your site integrates to your ERP, you can also take advantage of some extremely useful data management features.

See a demo of this plug-in here.

Think about your packaging

When you show products attractively packaged together, it helps to subtly convince buyers that they go together.

Best ideas for product bundles

There are many ways you can put bundles together. Some of the most popular and profitable include:

• A product bundled with its accessories e.g. a laptop with a software package and a mouse, or a washing machine, clothes drier and laundry basket.

• Bulk buys of similar products e.g. selling a curated case of beer or wine, rather than individual bottles. Some businesses allow the customer to create their own bundles.

• Collections of equipment or consumables e.g. baking or cooking bundles, or a lavender-scented collection of soap, hand-cream and candles.

• Bundles of useful basic essentials e.g. a spice collection or basic DIY tools like a screwdriver, hammer and spanner.

• Seasonal bundles or gift packs e.g. a pack of three different Christmas decorations or a beautifully packaged box of chocolate, wine and nuts.

• Popular products bundled with new or less well known ones (or even old stock you want to clear) e.g. a cleanser and toner bundled together with a free sample of a new eye cream. Once the customer tries the new eye cream, they may well want to buy it again.

• Products bundled with gift cards or discount vouchers, especially for once-off purchases e.g. with a hair-drier. The gift card or discount voucher encourages customers to come back to your store for something else, or acts as a referral if they choose to give it to someone else.

• Up-selling or cross-selling by offering related items, creating a discounted bundle e.g. if a customer orders a gaming joystick, offer them the 2019 version of a popular game bundled with the joystick.

• Recommendations of complementary items based on “Others who bought this also bought…” or “Frequently bought together”. This gives the customer other ideas of what they might like to buy.

The bottom line…

As with all business strategies, there’ll be some trial and error with product bundling. If you keep value and customer convenience front of mind, there’s a good chance you’ll develop better customer relationships and see long-term benefits. Make sure you balance that with short-term profits though. Carefully analyse revenue and profit projections for both unbundled and bundled options. Then track bundling performance along with customer satisfaction to make sure this strategy makes sense.