Wireless keyboards and mice. Burgers and fries. The Microsoft Office suite.
We experience product bundling everywhere. Heck, in pre-industrial agricultural societies, sellers were sweetening deals by throwing in discounted saddles with every horse purchase.
Even a musical album is technically a product bundle. Yet, oddly enough, many eCommerce businesses don’t consider bundling as a viable strategy. Perhaps they think it’s too much work, or they don’t know which products to bundle.
Maybe they’re so inundated with keeping the business afloat that they haven’t even considered it.
The bottom line is that any eCommerce business that doesn’t utilize product bundling leaves a lot of money on the table.
Product bundling is an excellent way to drive revenue, increase your average order size, move slow inventory, and provide customers with a “complete solution.”
In this post, we’ll:
- Define product bundling in-depth
- Outline the numerous benefits of product bundling
- And discuss some pro-tips for how to bundle well
Let’s dive in.
What is Product Bundling?
Simply put, product bundling is the act of combining multiple goods or services and selling them together at a lower price than if customers purchased them individually.
When you understand the ubiquity of product bundling, you start to see it everywhere. It’s almost more unusual to see products sold as individual pieces without some bundled option.
The Difference Between Bundling and Multi-packs
Before proceeding, we need to make an essential distinction between bundles and multi-packs. Bundles are distinct yet related products bundled together by predetermined criteria.
For example, a pen organizer, stapler, and tape dispenser might be classified as an “office supplies” bundle. These are different products tied together by a unified solution (organizing your office).
Conversely, a pack of three identical file organizers is not a bundle — it’s a multi-pack. More to the point, multi-packs are pre-packaged multiples of the same item.
What are Some Benefits of Product Bundling?
Before we get into the nitty-gritty of best practices and types of bundling, it’s essential to understand the ROI of bundles.
These bundles take time and resources to put together and advertise. Are the savings worth it?
Here are a few of the many benefits afforded to businesses with a successful bundling strategy.
Product Bundling Increases Per-order Revenue
The first and most apparent benefit of bundling is that it increases your per-order revenue. This is helpful on multiple fronts. The most common eCommerce platform, Amazon, takes a fee for every purchase. Bundling means you’re only getting charged once instead of once per item.
Secondly, you enjoy revenue on products that customers would’ve never purchased individually but choose to buy in a bundle.
Product Bundling Decreases the Likelihood of Revenue-sharing With Competitors
Here’s an example. Let’s say you own a music shop and sell unbundled electric guitars. After a customer purchases their instrument, they’ll need certain accessories like an amplifier, picks, and a guitar case.
They may also need additional tools like a guitar repair kit, extra strings, or a capo.
When you don’t have these necessary tools bundled and ready, there is a higher chance customers will find them elsewhere. They may go home and price these things out online, ordering from two to three of your biggest competitors.
Never underestimate the power of a “convenience premium.” If you can provide a bundle of everything a customer needs to start jamming, they’re much less likely to buy from competitors.
This is especially true if the cost of the bundle is less than the sum of its parts.
Product Bundling Helps Move Stagnant Inventory
If you have dying stock or a slow-moving SKU, there’s no better way to give it a shot in the arm than through a bundle.
This saves you money on multiple fronts:
- You reduce carrying cost and save shelf space
- You mitigate motion waste by conveniently grouping these products in your warehouse
- You can resurrect dead stock and not lose the initially invested capital
Product Bundling Gives Customers a Complete Solution
When a customer purchases a product from you, it’s just that: a product. When a customer buys a bundle from you, they’re buying a complete solution.
At least, that’s the ideal scenario.
Dollar Shave Club’s bundling strategy is an excellent example of this principle. Sure, you could sign up to receive a monthly delivery of their razors, but that’s not the complete solution.
From the moment you land on the homepage, to the box configuration menu, to the checkout, they try their darndest to upsell you on their pre-shave lotion, shave butter, and post-shave dew.
Why? Because they don’t want your shaving experience to be piecemealed together with competitors.
They want customers to have the complete Dollar Shave Club shaving experience from start to finish. This not only creates a deeper level of brand loyalty but generates more revenue and moves inventory that wouldn’t typically sell on its own.
Product Bundling Helps You Win Amazon’s Buy Box
If you’re an Amazon FBA seller, you know the power of winning the Buy Box. For those unfamiliar, when you click the “Buy Now” button on Amazon, the sale automatically goes to the seller who “owns the Buy Box.”
It’s unlikely that anyone would take the time to purchase from someone who didn’t own the Buy Box. Most Amazon shoppers are there for convenience and one-click orders.
It’s by far the most frictionless way to purchase on Amazon and the most coveted spot for sellers.
Winning the Buy Box is exceptionally competitive. Dozens of vendors may be competing for it at any given time. Rather than clawing and fighting for a seat at the table, product bundling allows a clever loophole to this dilemma.
Here’s what I mean: say you specialize in selling health and exercise equipment. A particular jump rope is a top seller and highly competitive in the Buy Box. The same goes for a yoga mat and a protein drink shaker bottle.
If you have an IMS like SkuVault integrated with your channel management platform, you can study the purchasing trends of your customers. Using these analytics plus the “Frequently Bought Together” section on Amazon, you decide to bundle the top-selling health and exercise supplies into the “Ultimate At-Home Health and Exercise Bundle.”
While others may be dominating the Buy Box for each item, you’ll have it all to yourself in this bundle. Why? Because Amazon recognizes this bundle as a single product, giving you the complete competitive advantage over other vendors selling the items piecemeal.
Plus, if you’ve done your homework with SkuVault’s demand forecasting and correctly interpreted your analytics, these are products customers are more likely to purchase together anyway.
The net effect is less competition in the Buy Box plus all the other benefits mentioned in this section.
Product Bundling Techniques
Now that you’re thoroughly sold on the benefit of product bundling, let’s get into some specific types of product bundles.
Pure product bundling means consumers can only purchase certain products in a bundle. There is no option to buy items individually. Video game giant Nintendo tried this with unfavorable results (more on that in the next section).
Mixed product bundling gives customers the ability to purchase products separately or in a bundle. In mixed bundling scenarios, the customer is almost always encouraged to buy the bundle rather than the individual pieces through discounted prices and sales page optimizations.
The customer usually configures mix-and-match product bundles before the point-of-sale. Dollar Shave Club is a perfect example of this. Consumers customize their monthly shave box with accessories and add-ons before they checkout.
Amazon’s “Frequently Bought Together” section is a perfect example of a cross-sell bundle. While it isn’t an actual bundle in the sense of being intentionally packaged together, it’s a powerful way to offer a complete solution through AI-driven recommendation engines.
Gift or Themed Bundles
These are bundles grouped by a particular theme, event, or demographic. For example, you might create a “Newborn Baby Bundle” full of helpful products for families bringing little ones home from the hospital. Or a “New Kitten Bundle” that has food bowls, toys, catnip, and a collar for pet owners.
This bundling strategy is a great way to win Amazon’s Buy Box and source multiple quality products into a complete solution package.
Convenience Product Bundles
I’m a ‘90s baby, so I remember the joy of waking up to a new Furby under the Christmas tree only to face the bitter realization that my mom forgot to buy AA batteries (I forgive you, mom).
This is what the convenience product bundling strategy seeks to alleviate. A more modern-day example of this would be a digital camera bundle that includes SD cards, a case, a tripod, a strap, and maybe even an extra lens.
Nobody enjoys buying SD cards, just like nobody enjoys buying AA batteries. But for the convenience of shooting photos (or playing with your Furby) immediately, this sort of bundling makes a lot of sense.
Product Bundling Best Practices
Now that we’ve covered why product bundling is so beneficial and some different bundling approaches, let’s move on to some pro-tips for bundling success.
Only Bundle Complimentary Items
This may seem like common sense, but it can be easy to get bitten by the “bundling bug” and get dollar signs in your eyes. There are many exciting and profitable bundle variants, but the golden rule to remember is to bundle items that complement each other.
Otherwise, your bundle won’t feel like a complete solution but a haphazard cash grab.
Find Your Anchor Product
The anchor product is the centerpiece of every product bundle. It’s the Big Mac in a McDonald’s combo meal. The camera in a DSLR photography bundle. The hit single in an otherwise mediocre album.
The anchor product is what gives power to the add-ons, cross-sells, and other bundled items. Without their razors, do you think anyone would care to buy all the fancy creams and lotions from Dollar Shave Club? Not likely.
The best way to find your anchor product is to study your inventory management and channel sales analytics. Using an IMS like SkuVault, you can determine which products are most often shipped together and their revenue potential.
This will help you not only determine what your customers are most likely to buy in a bundle but which products can net you the highest profit.
If you don’t have access to an IMS or historical data, start by studying the recommendation engine on Amazon. Run a few tests. When you navigate to a particular product’s page, which items pop up in the “Frequently Bought Together” section?
Add a few similar items to your cart. Your Amazon homepage should now be littered with “People Also Bought” recommendations. These are an absolute goldmine for ideas, especially when you don’t have access to analytics.
Give the Option to Purchase Separately (but offer a sense of exclusivity)
In the above section on the different types of bundling, we discussed the difference between pure bundling and mixed bundling and why customers should always have the option to buy separately.
We need to look no further than Nintendo for a proof case on the subject. Harvard Business School professor Vineet Kumar conducted an in-depth study on Nintendo’s pure bundling strategy for the GameBoy Advance handheld gaming console in the early 2000s.
He found that bundling a game with the console using a mixed bundling strategy created a net positive effect. While consumers could buy both separately, purchasing them together at a discount saw a 100,000 increase over and above projected hardware sales.
However, when Nintendo only allowed consumers to purchase the software and hardware together (pure bundling), they saw a 20% decline in sales. That’s millions of units and a multi-million dollar error.
However, the iconic game company quickly learned from its mistakes (and the rest of the business world with it thanks to this study).
While they still offer bundles, Nintendo allows all hardware and software to be purchased individually. To incentivize their bundles, however, they offer limited edition consoles with unique branding or design.
For example, after they’d taken their lumps from the pure bundling experiment, they released their new handheld console generation, the Nintendo 3DS.
They utilized mixed bundling by offering a Zelda game at a discounted rate and a special Zelda-themed game console. This allowed die-hard fans to appreciate the exclusivity of the bundle without ostracizing other consumers who purchased items separately.
Use Different Packages
One of the most enjoyable parts of buying things is unboxing them. Billions of viewers flock to YouTube channels dedicated to one thing: unboxing videos.
Unboxing is a big part of brand immersion, and it can make or break your bundle. Customers can immediately tell the difference between similar products thrown together in a brown box haphazardly and a completely intentional solution.
Take our above example of the “Newborn Baby Bundle.” Rather than bottles, pacifiers, and little baby gloves thrown together in a brown box, imagine a consistently branded package.
Maybe there’s a pleasant little graphic of a baby on the front and a nice card when you open it up thanking the new parent for their purchase. Each item is organized logically in the box with cute packaging.
This may seem over the top, but if you’ve ever ordered a subscription box, you know how these little details make an ordinary buying experience extraordinary.
The bottom line is to be intentional about your packaging. Intentionality goes a long way, even for folks who usually don’t care much for branded boxes or cute graphics.
Feature Your Bundled Products in Prominent Places
If you’re serious about your bundling strategy, it’s advisable to implement some conversion optimization best practices. Such as:
- Feature bundles “above the fold” of your site with attractive graphics and clear discount signals
- Utilize “alert banners” at the top of every page on your site to inform users of your bundle
- Stack bundles with coupons for even more attractive discounts
Just about every modern eCommerce platform will have the technology to accommodate these best practices.
Upsell During the Checkout Process
Featuring your bundle above the fold, in your alert banners, and throughout your site is a great start. One of the best places to make a last-ditch, hail mary effort to upsell customers on your bundle is on the checkout page.
Some brands even offer an even deeper discount for users who bundle up via the checkout page. This can be a great sweetener to tip an uncertain consumer, but make sure to protect your margins with all this discounting.
Anchor Your Product Bundling Pricing
Infomercials are a relic of a bygone era. But if you were to go back and watch one, you’d likely see an overly enthusiastic salesperson shouting about getting something for “only $199!”
However, by the end of the ad and all the deal sweeteners, they say they’re willing to give it up for “only $24.99!” This price drop feels drastic and like an extreme discount. Why? Because $199 had been “anchored” in your mind throughout the infomercial’s duration.
Sellers can apply the same principle to their bundling strategy (with less cringe-inducing enthusiasm).
When you have a product that’s normally $199, make it abundantly clear that the bundled version is significantly less (while still protecting your margins, of course).
The best part of this is that you don’t need to discount the other accessories for the bundle to feel like an incredible deal.
What is Product Bundle Pricing?
One of the most important psychological concepts in eCommerce is that of consumer surplus. Everyone has a conscious or subconscious amount of money they’re willing to spend on a given product. This can be due to their preconceptions about its value, competitor pricing, or other intrinsic factors.
The difference between this value and what they pay for the product is called a “consumer surplus.” In other words, it’s how much money they feel like they’re saving.
You can also think of it as a “reservation price,” or the amount they won’t exceed in their purchase.
Whether they realize it, all consumers are constantly calculating their reservation prices for particular products, especially in bundles.
For example, if you sell a digital camera unbundled for $599 and feature a bundled version for $699, you’re banking on a consumer surplus of at least $100. If the consumer doesn’t feel like the value of the add-ons is worth the $100, they won’t buy the bundle. Common sense, right?
Where this becomes important is if you’re underpricing your bundle. You might have a consumer surplus of $200. Meaning, you can afford to increase your bundled pricing by $100 and bump right up against that threshold of consumers feeling like they’re getting a good deal.
This delicate dance of understanding your customers’ reservation prices requires a lot of study, data analysis, and experimentation.
Check out this resource for more information on this crucial (yet very complex) topic.
Next Steps in Product Bundling
This post has given you plenty of information and best practices to get started in your bundling journey. However, this is just a primer. As you dive into this subject, you’ll find a deep rabbit hole that intersects with economics and buyer psychology.
When executed well, these product bundling principles will result in a positive ROI and good eCommerce growth.
Growth means more moving parts, both metaphorically and in your warehouse. If you’re not set up with a comprehensive inventory management platform, scaling turns from a dream into a nightmare.
A good IMS like SkuVault is the cornerstone of every well-run eCommerce operation. Whether you’re looking for rapid growth through product bundling or need a better handle on your inventory management operations, we can help.
We’d love to show you how. Reach out to our team for a live demo of SkuVault today.