“Do you want fries with that?”
We’ve all heard this line. If not fries, it might be cable TV with your internet connection, or purchasing a complete software package rather than Excel by itself.
The Happy Meal has made this marketing strategy famous: Product bundling has become a go-to tactic for brick-and-mortar businesses and eCommerce websites alike. There are a lot of benefits that come with combining products into a bundle - both to your business and your customers.
But bundling is not as simple as putting together two products and offering them for a lower price. Understanding your customer’s buying behaviour and underlying psychological processes is important to get it right.
What is Product Bundling?
At first glance, product bundling seems simple. It refers to a marketing strategy where you offer several items as a combo - and the package price is lower than the sum of the prices of individual items.
For example: imagine you’re moving into a new house and looking to stock up your kitchen.
You’re presented with option A:
- Purchase each plate individually at a cost of $15 each. Total cost for 6 = $90
Or option B:
- Purchase a set of plates at a lower cost of $70 for the entire set.
Which one are you likely to choose?
The Psychology of Product Bundling
The reason bundling works so well can be found in psychological processes. In the minds of customers, product bundling increases perceived value. Lower prices and added convenience make for a greater shopping experience.
Bundling also influences subconscious buying decisions. This works especially well for fashion-related eCommerce. Rather than having customers going back and forward between multiple tabs, determining which pair of pants matches a certain jumper, offering an entire outfit at a discount makes the buying decision easier - and leaves the customer feeling like they’ve struck a great bargain!
What are the Benefits of Product Bundling?
Product bundling is beneficial both to you and your customers. If done right, it is a win-win situation for buyers and sellers.
For your eCommerce Business
Use the Opportunity for Up-selling
We’ve already dived into the details of Up-selling before in this article. It includes any technique where a seller prompts a customer to consider buying additional products. And that’s exactly what you can do through product bundling. Instead of just buying one item, you can offer the customer an array of complementary products.
Increase your Average Order Value (AOV)
The goal of bundling is to entice your customer to buy more products at once. As a result, you are able to increase your average order value, and with that overall sales and revenues from your Shopify store.
Let’s have a quick look at the maths. Your revenues are made up of:
number of leads x purchase frequency x average order value
Increasing any of these factors will have a multiplying effect on your revenues. Whilst many marketers focus on the first component - the number of potential and actual buyers - product bundling is a great strategy to target the average order value.
What is Average Order Value?
The AOV is the total revenue generated per number of checkouts. If you can increase the revenue generated from each customer, your return on investment goes down, so that the cost of customer acquisition can be dramatically reduced. So if a customer opts for a bundle rather than an individual product, their overall order value increases, translating into higher revenues for you.
Makes sense, right? The more each customer spends at your store, the better.
Manage the inventory for related items
Combining products into a bundle helps you manage your inventory for related products. This strategy works in two ways. This strategy can work in 2 ways:
- You can use bundling to raise the profile of a new product, allowing you to test the product on your customers and get feedback
- You can use this method to clear old or slow-moving inventory
At the centre of each bundle must be one of your most popular items. Bundling a popular item with a new item invites customers to try the latest product at a lower price, and receiving their favourite choice at a discount. This works especially well with price-sensitive buyers.
Bundling a less popular item with a popular one works in a similar way. The price of the individual item is reduced, so that customers are more likely and willing to purchase it.
For Your Customers
It’s a bargain!
When purchasing a combo, customers feel like they are getting a good deal. They feel rewarded as they receive a discount, and the “It’s a bargain!” realisation creates a positive association with purchases from your store. Customers are then more likely to return in the future, and you have successfully established the first steps towards brand loyalty.
It’s so easy!
Another great benefit for customers is convenience. Rather than having to go through your entire site and putting each item into the cart individually, they can order a set of products through one click. The time- and effort-saving benefits of product bundling have the potential to greatly increase customer experience, further increasing the probability that buyers will return in the future.
Should you Adopt a Product Bundle Strategy?
Before brainstorming complementary products for your bundles, you need to understand whether this marketing strategy works for your business.
Does your eCommerce platform support product bundling? Research whether your Shopify account lets you develop and advertise product bundles.
Can you afford it? Even though your average order value increases, the margins earned from products included in the bundles will be lower. Do you have a product that is produced at very low cost and works great in a bundle?
How will you let your customers know about the offer? Advertising the product bundle is crucial, so that customers who might not have come to your store to buy a razor leave with an entire shaving kit.
How to put together a Product Bundle
Product bundling looks like a complete win-win situation for you and your customers. And when done right, it is! But bundling is not as straight forward as it looks, and requires a lot of testing and fine-tuning. Most importantly, it requires an understanding of your buyers. There are 2 different ways you can go about product bundling:
1. Develop Product Bundles and Test Buying Behaviour
With this strategy, you start with the products. As an eCommerce business, you should either consider bundling by product category, or by product application. The difference is highlighted in the following examples:
Example 1: You put together a ‘holiday-survival-kit’, including small samples of shower gel, conditioner, body wash, sun screen, and hair removal cream. Each of these falls into the category of ‘beauty products’.
Example 2: You develop a product bundle including a razor, shaving foam, a pack of razor blades and moisturiser. Each of these products are recommended to use in succession.
The key to finding the best bundles is looking for complementarity. Once you think you’ve found appropriate bundles, publish them on your website and monitor your sales data. Tracking statistics like AOV, and the number of sales of the bundle and individual items will be helpful. Depending on what your customers tell you through their purchases, you can then fine-tune your bundles.
2. Understand Buying Behaviour and Determine Product Bundles
The second strategy works the other way around. Look at the data that your Shopify account provides, and try to understand buying behaviour. What products are usually purchased together? Do customers who purchase a razor in one week return to buy new blades a week later?
Follow your customers’ buying behaviour and improve their experience by bundling together products that they are purchasing together.
Once you’ve decided on product configuration, you need to set a pricing strategy and develop a marketing campaign around the bundle. Letting your customers know that they can save money by buying more products is crucial. Once your campaign has started, track your sales and revenues, and learn from the performance of each bundle.
Before You Bundle Up
The success of product bundling is rooted in customer psychology. A recent study by Harvard Business School found that only a ‘mixed bundling’ strategy works. This means that you should be selling individual products AND offer them in a bundle, rather than only offering one or the other. Why? Customers must feel like you are offering choice, rather than forcing additional products on them. Bundling works well when you concentrate on the benefits to your customers. The benefits for your business will happen automatically.
How to Add Product Bundles to your Shopify Store
Once you’ve decided that this marketing strategy works well for your online business, you can add it to your Shopify account.
Bundling on a Standard Shopify Account
If you are using a standard Shopify account, product bundling is not offered as a part of the account. Instead, you’ll have to install an app, such as Upsell Bundles, that lets you add bundles to your store. Simply follow the instructions in the app and start offering some great bargains to your customers.
Bundling on a Shopify Plus Account
The Shopify Plus account makes product bundling a whole lot easier. With access to Shopify Scripting through the Script Editor, you can easily add product bundles and other discounts to your online store.
Elkfox are Shopify Plus experts, and we are here to help you develop your online business, in whatever way you need. We can help you incorporate product bundling in your Shopify store so that both you and your customers benefit. Get in touch with us.