Product Bundling: How to Take Advantage of Value and Convenience to Drive Sales

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Almost any consumer will recall a time that they’ve gone to a store or visited a retailer’s store with the intention to buy one product, only to buy a second or even third product in the same visit. Product bundling is a simple but time-tested strategy, whether your business is a major retailer or boutique store. When executed well, bundling multiple products together can increase sales and create customer satisfaction. This is a win-win; your customers get to enjoy a great deal, while your business’ revenue increases.

Bundling: How Does It Work?

Product bundling is when you market several items as one ‘bundled’ product, typically in the form of a combo, kit or multibuy offer. This style of product bundling is often referred to as ‘packaging’ because products are offered together as a package. For example, a menswear retailer may offer a ‘suit package’ with a jacket, pants, shirt and accessories for a lower price than the combined RRP of each product.

Product bundling can also refer to cross selling, where customers are offered complementary products while they are shopping or at checkout. This approach to product bundling is more commonly used by ecommerce retailers – think Amazon’s “frequently bought together” feature.

A rarely used product bundling method is to require a minimum order quantity – this is common in the wholesale context, but not common with retailers who are in the business of selling small quantities of product. This approach may be used where overheads associated with procuring a particular product are high and do not increase significantly as the number of products are ordered. Many retailers are now incentivizing customers to purchase multiple orders (or at least a minimum spend) in order to get value for their money, or perks such as free shipping.

Perception of Value

The primary reason that bundling is an effective tool to increase sales is because customers who purchase bundled products feel like they are getting value for their money. A shirt which retails for $100 feels like a great deal when it is marketed as a free add on with a $300 suit.

That said, product bundles are not always sold at a discount. Bundling can also be convenient for customers who are stressed or short on time; supermarkets regularly offer ‘soup mixes’ of winter vegetables at a premium price, appealing to shoppers who do not want to select each individual item.

Retailers that can offer discounts, convenience or both tend to garner significant customer loyalty – customers perceive that the retailer is uniquely positioned to save them two valuable and scarce commodities: money and time.

How to Bundle Well

How do you decide which products are best to bundle together? While opportunities to bundle will be obvious in some cases (such as the menswear example above), other great bundles may be less obvious. One approach is to use data from an inventory management, point of sale or ecommerce system to identify products that are commonly purchased together, or by the same consumers.

Another approach involving bundling underperforming or ‘at risk of obsolescence’ products with strong performers, is less customer centric but can deliver strong results for a business that is looking to reduce excess or slow moving inventory.

However you approach product bundling, make sure to keep good records. While a bundle may have independent pricing, sales must still be recorded against specific products in an inventory management system in order to manage stock levels for each component product and to accurately keep track of the cost of goods sold.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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