September 26, 2017    < 1 min read

Product bundling is a pricing strategy that has become increasingly popular in recent times, as companies seek means to offset the costs of acquisition. Here, a company will sell multiple items as a bundle at a price lower than the cost of buying them individually.

For example, many electronics retailers use product bundling to sell various hardware, software and accessories in one solution. Some retailers may offer a deal where buying a certain computer will come with additional items such as a printer, antivirus software or other programs.

Similarly, banks often bundle products to maximise the gains from each customer. For example, you may be offered interest free benefits if you hold multiple loan, checking and savings accounts. These types of offers work to boost sales and encourage customer retention. Below, we examine the impact product bundling has on sales.

Profitability

When done right, product bundling can be an effective means to boost profits and sales. According to consulting firm Collabera, product bundling can boost sales by 15 to 30 percent. Bundling products means a better initial return on acquiring a customer, and it also creates the potential for add-on sales in the future by getting the customer interested in items they potentially were not initially looking to purchase.

Inventory Control

Aside from helping to increase sales, product bundling is also an excellent method for inventory control. Getting rid of excess or obsolete stock without simply disposing of it or passing it on to charity can be difficult. Product bundling is a good way to get customers to buy fast-moving items with less popular products, while still making a sale. This way, you can offset any loss caused by excess stock, facilitating successful inventory control.

Customer Satisfaction

Customers often prefer to buy products in singular solutions, so buying in bundles can provide a convenient, efficient way to shop. This method can provide a quick solution to multiple customer needs at once, and this can help to keep your customer base happier. Satisfied customers are more likely to return in the future, boosting your ability to make more sales.

Precautions

The bundling strategy has been an extremely successful approach for large American companies such as Wal-Mart and Target. Large businesses such as these retailers benefit from the approach because their sales volume is large enough to offset behind-the-scenes expenses like production costs. Smaller businesses should proceed with caution, since they likely have less reliable sales volumes.

Therefore, if you are considering this option you should always analyse revenue and profit projections before doing so to prevent inhibiting profitability. It is also a good idea to ensure that you have a sufficient amount of stock to pull off this method from the outset. If the method proves effective, you may run into problems if you have not ordered enough stock in advance. Bundling can therefore influence your inventory control methods in various ways that should be considered.

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