Product bundling is an effective strategy for increasing revenue and clearing old stock. It enables businesses to move products faster and improve the average value of customer orders. This guide explains how product bundling works, strategies for creating bundles, and the various types of bundles you can create.
What is product bundling?
Product bundling is a sales strategy that involves grouping multiple products as a package and selling them as a single unit. Manufacturers, wholesalers, and retailers provide customers with a convenient purchasing experience by ‘bundling’ various products together.
Product bundling streamlines the buying process and saves customers time and effort. Customers can acquire all the necessary components or related items in a single purchase.
The much-loved Tesco Meal Deal is an example of effective product bundling. Customers can pair a sandwich, pasta, or salad with a light snack and small drink for a reduced price. As a result, shoppers that might’ve only walked in to buy a sandwich end up spending a little extra for the meal deal instead.
How to create product bundles in Unleashed
See how you can use inventory management software with assembly features to create unique product bundles in this short module demo:
7 key benefits of product bundling
“Because our main product pairs four products together, our average order values are three to four times higher than most of our competitors.”
- Ryan Woodbury, co-founder and co-CEO of Needed, via Modern Retail.
Product bundling can be beneficial for vendors and customers alike. It allows sellers to move goods faster and means customers can save time shopping and score great deals.
Below are nine key advantages to implementing a product bundling strategy.
1. Increase Average Order Value (AOV)
Product bundling can be a strategic pricing tool for increasing the average value of customer orders. By bundling products together, you can offer discounts or better pricing than if those goods were purchased individually. This creates a perception of value for customers and can incentivise them to spend more than they originally intended.
Bundling also provides opportunities for upselling and cross-selling. You can combine popular or high-end products with complementary items to encourage customers to pay more.
When bundling to increase AOV, keep an eye on your margins. Higher revenue may be alluring, but remaining profitable is usually much more important.
2. Increase sales
Attractive product bundles can lead to more sales, especially when competitors are selling the same products unbundled.
The convenience of receiving multiple items together can encourage customers to make a purchase they might not have otherwise considered.
For example, if one shop sells an electric razor and another shop sells the same razor bundled with discounted razor heads and beard oil, customers might prefer to visit the second shop. Once there, there’s also a chance they’ll buy other items they would’ve ordinarily bought from the first shop.
3. Get rid of excess stock
Product bundling is an effective way of getting rid of obsolete or excess stock.
Holding too much inventory has a detrimental impact on a business’s cash flow, agility, and storage costs. By bundling slow-moving or ‘dead’ stock with more popular goods, you can clear the shelves to make room for better-selling items.
4. Reduced costs
When three products become one bundle, the marketing and order management costs for each of those products effectively drop by up to two-thirds.
The individual picking, packing, and shipping costs are combined. A single advertisement can promote the entire bundle. And customers need only visit a single web page (for eCommerce) or shopping aisle (for brick-and-mortar) to purchase all three.
5. Faster fulfilment times
Product bundling can speed up the picking and packing process, meaning the customer receives their items sooner. Each product bundle can be kitted in bulk, ready for orders to come through. You can also adjust the stock locations of bundled goods to provide more efficient access to each item.
6. Simplified purchasing process
Bundling streamlines the purchasing process for customers.
Instead of having to select and buy multiple items separately, customers can make a single purchase and get all their products or services in one transaction.
This saves the customer time and effort, enhancing the overall customer experience. It also increases the chance that they won’t purchase individual items in the bundle from your competitors.
7. Introduce new product lines
Product bundling provides an opportunity to leverage the popularity or desirability of one product to boost the sales of other items.
For example, Sony PlayStation often bundles newly released video game consoles with controllers and a selection of their most popular games. The effect is that customers find the package more appealing – especially as it allows them to immediately start using the console.
Types of product bundling
“Product bundling is most effective when the deal you’re offering is easily understood. This means that offering a huge bundle of many products can be unattractive to customers, even if the bundle offers a great saving.”
Product bundling can be executed differently for different product groups, allowing your brand to implement the most relevant solution for your business goals.
Let’s look at the main types of product bundling models:
- Pure bundling. Pure bundling is where customers can only purchase the grouped products as a bundle. Individual items are not available for separate purchase.
- Mixed bundling. Mixed bundling means customers can purchase individual items separately or as part of a bundle. This strategy caters to a broader range of customer preferences than pure bundling.
- Cross-category bundling. Cross-category bundling refers to combining products from different categories or industries into a single bundle. For example, a fitness brand may offer a bundle that includes workout equipment, clothing, and a meal plan.
- Pure add-on bundling. Pure add-on bundling involves offering an additional product as an add-on to a primary product. It encourages customers to purchase by providing an extra item that complements the primary product.
- Leader-follower bundling. Leader-follower bundling is offering a primary product as a standalone item and then providing additional related products as separate bundles. The primary product acts as the leader, and customers have the option to purchase the standalone item or bundle it with complementary items.
- Customisable bundling. Customisable bundling is where customers create their own bundles by choosing specific items from a selection of product options. This gives customers the flexibility to personalise their purchases according to their preferences and needs, creating a sense of ownership and satisfaction.
These different types of product bundling strategies enable businesses to meet customer demands, increase sales, and create unique value propositions. Each type has its advantages and should be evaluated based on your specific goals and the preferences of your business and target market.
Product bundle pricing strategies
Before you decide to launch a bundle, you’ll need to consider your product bundle pricing strategy.
How will you ensure profitability? What’s the main value of your product bundle in the customer’s eyes?
The product bundle pricing strategies below offer a solution for most circumstances.
Pure bundle pricing
Pure bundle pricing involves setting a single price for the entire bundled package; customers cannot purchase the individual items separately at different prices. This strategy aims to create a perception of value for the entire bundle, encouraging customers to see the package as a better deal than buying the items separately.
Mixed bundle pricing
Mixed bundle pricing allows customers to purchase the bundled package or individual items separately, each at their own prices. This strategy provides flexibility to customers and caters to different preferences and budgets: customers can choose the bundle if they find it more advantageous or buy specific items if they don’t need the entire package.
Captive pricing means offering a product or service at a low price as a base item while charging a higher price for additional items required to fully utilise or enjoy the base item. For example, a printer manufacturer may reduce the price of a printer but charge higher prices for replacement ink cartridges. This strategy locks customers into purchasing the higher-priced additional items.
Premium bundle pricing
Premium bundle pricing refers to offering a bundle at a higher price compared to the total price of the individual items if purchased separately. This strategy focuses on the value and convenience of getting a curated bundle. It’s ideal for targeting customers that are likely to pay a premium for the convenience or exclusivity of the package.
Discounted bundle pricing
Discounted bundle pricing means offering a bundled package at a lower price compared to the total price of the individual items if purchased separately. This strategy aims to provide customers with a perceived discount or cost savings. The attractive pricing makes the bundle more desirable.
(Think: a Cheeseburger combo from Mcdonald’s wherein fries and drink costs are reduced.)
Tiered bundle pricing
Tiered bundle pricing means offering multiple bundles at different price points. Each tier provides a different level of value or caters to a specific customer segment. This strategy allows customers to choose the bundle that best meets their needs and budget while encouraging them to trade up to higher-priced tiers for additional benefits.
How to calculate a product bundle price
To calculate the optimal product bundle price, you must first determine your gross margins for each product included in the bundle.
You can do this by subtracting the Cost of Goods Sold (COGS) from your original sale price.
Next, choose a discount value that still allows you to make money on the bundle.
Selecting a product bundle price that is both attractive to customers and economical for the company can be tricky. Research the prices of similar bundles sold by your competitors and continually test different pricing models on the market to determine a winning strategy.
Product bundling examples
Here are a few common examples of product bundling in action:
- Technology bundles: A technology company bundles a laptop, a wireless mouse, and a laptop bag together as a package.
- Holiday packages: A travel agency offers a travel bundle that includes a hotel stay, round-trip airfare, and a guided city tour.
- Meal deals: A food retailer groups individual food and drink items together to create a meal, as in the Tesco example we touched on earlier.
These examples show how product bundling can be applied in different industries to offer customers. Whatever your industry, there are likely opportunities to bundle different items from your product portfolio together and improve the customer shopping experience.
Ecommerce product bundling
Most eCommerce platforms provide automated or manual bundling applications. Let’s look at a few examples.
Shopify product bundles
Shopify has two product bundle options: fixed bundles and customised bundles.
- Fixed bundles are Shopify’s solution to standard and multipack bundling.
- Customised bundles enable customers to mix and match bundled goods.
This can all be done from the product page within your Shopify admin dashboard.
Shopify also offers the Shopify Bundles Sample app – an example of how to build a bundle app and implement the cart transform function to update the shopping cart.
WooCommerce product bundles
Add a bundle to your catalogue to sell related products together. You can then discount the entire bundle or individual items.
You can also automate higher discounts in WooCommerce for those who purchase more by utilising dynamic bulk discount rules.
Amazon product bundles
On Amazon, a product bundle consists of multiple single items which are identified by a unique ASIN/UPC (Amazon Standard Identification Number/Unique Product Code) and sold together as a single offer (a bundle listing). The product bundle must consist of related items.
Bundling is only available to sellers who own a brand and are responsible for selling the brand on Amazon. It is currently only an option for those using the Amazon US Store.
Product bundles can be created in the Seller Central Account, or by navigating to Brands > Virtual Bundles. You must then select 2–5 ASINs and follow the steps to complete the bundle.
We suggest you read Amazon’s product bundling policies before developing your strategy.
Magento product bundles
In Magento, product bundling functions as a collection of simple or virtual products sold together as a ‘kit’. This allows buyers to customise their items by choosing from a set of pre-configured options.
Follow this seven-step process to create a ‘Bundle Product’ in Magento.
Once completed, you can then create more complex bundles such as mix-and-match, product launch, and buy-one-get-one bundles.