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Acing your Product Bundling Pricing Strategy

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You&#;ve seen it, the shrink-wrapped package of shampoo and conditioner, the meal combos with a burger, fries, and drink &#; all promising convenience, savings and extra value. These are just some examples of product bundling pricing in action.

But did you know that subscriptions are also a clever way to implement product bundling pricing? At Upscribe, we know a thing or two about optimizing subscription businesses. So let&#;s take a look at product bundling pricing and how it can work for you.

What is price bundling?

Price bundling or product bundling pricing is a pricing strategy where two or more complementary products are sold together for a price that&#;s lower than what the products would have cost individually. 

The discounted price motivates consumers to buy the bundle because it&#;s a better deal than buying them separately. This leads to increased sales of all the products in the bundle for the seller.

For example, an art supply store sells a popular canvas for $5, washable paints for $2 and slow-moving paint brushes for $3, and wooden easels for $3 separately. The company then decides to create a beginner&#;s art bundle with all the products for a discounted price of $10.99. 

The customer&#;s perceived value of the package is higher because it has everything they need to start their painting hobby. It&#;s convenient because they don&#;t have to look for brushes, canvases, or paints separately. They&#;re also saving $2, so they buy the bundle. 

On the seller&#;s side, they&#;re now able to move the inventory of the slow-moving brushes and easels together with canvases and paints while still making a profit. It&#;s a win-win.

Different price bundling strategies

There are different price bundling strategies or techniques. The type of products you&#;re selling will determine which bundling strategy is appropriate for your business. The two common bundling strategies are pure bundling and mixed bundling.

Pure bundling

Pure bundling is where the products within a package or bundle are only sold together. You can&#;t buy one without the others. From our art bundle example, if the seller only sold the bundle together and not separately, it would classify as a pure bundle.

Another example of pure bundling is Blue Apron&#;s subscription meal kits. The kits are made up of fresh ingredients which you use to create a home-cooked meal based on your chosen menu. The ingredients cannot be bought separately.

Mixed bundling

With mixed bundling, the products are sold together as a bundle but there&#;s an option to buy them separately. Billie sells women&#;s shaving kits, including the smooth operator deluxe starter kit. The 5 products in the bundle complement each other to provide a &#;full shaving experience&#;. Buying the products separately on their website will cost $40.00, but as a kit they sell for $35.

How price bundling can help you grow your business

Increase Average order value

Instead of buying just one product for its full price, a customer buys 2 or more products in a single transaction. Even with a discount, they&#;re still spending more than they otherwise would have if they just bought one product. This results in an increase in the average order value.

Simplifies buying decision 

Nowadays your customers have all the information they need at their disposal. It&#;s easy to look up prices and product information to make comparisons quickly with the click of a button. When you make the price of individual components known, price-conscious consumers are able to weigh the value of the bundle and make a purchase decision quickly because the benefits and savings are clear.

Helps move stagnant stock

With bundling, you don&#;t have to discard stagnant stock. You can pair it with a complementary fast-moving product as a bundle. In some cases, the customers aren&#;t aware of your other product, so bundling could help introduce them to new product offerings to try.

What to avoid when bundling products

Bundles that are incompatible with customer needs

Customers may not buy the bundle if they feel like they don&#;t need the other products in the package. Don&#;t just add random products.

Think of the customer journey while using your products and consider what else could go well with one product for the customer to have an enhanced experience. Done wrong, bundling could be detrimental to your brand. Bundling unnecessary products can look like a money grab, where you&#;re trying to get them to pay more unnecessarily. 

Restricting customers&#; freedom of choice

Another problem is that if you remove the customers&#; freedom of choice to buy products individually, they could decide not to buy from you at all.

For example, if the art bundle in our previous example was a pure bundle, customers could get frustrated because they just wanted canvases and paint. Or they just want to buy paints from a different brand. 

They could end up buying from a supplier that gave them the choice to either customize their own bundle or allow them to buy separately. Include the option to purchase individual items at a premium rate.

Examples of price bundling done right

1. Fenty Beauty

Fenty Beauty has various skin care bundles that include an essential 3-step skincare routine. These are complementary products, which means the sale of one product drives the sale of the others. Most customers don&#;t just buy a cleanser. They usually buy all 3 because they&#;re used together in a skincare routine.

What they did right

• Selling them as a bundle reduces the chance that a customer will buy toner from one brand, and a moisturizer from a different brand. They use one brand for all 3 products 

• Showing the price savings from buying the bundle as opposed to buying them separately shows the potential savings. 

• Showing a significant price reduction (over 30%) customers can get from purchasing the bundle, from $96.00 to $61.50.

• The individual prices of the products are shown for comparison. Customers can see the cost of buying them separately or buying all 3 but not in the bundle.

• To sweeten the deal, an even lower (installment) price is offered through Afterpay.

2. Beekeepers Naturals

Beekeepers Naturals have a variety of health bundles to help improve wellness and immunity. The products are available for sale individually or as kits.

What they did right

• A 10% discount is applied at checkout and a further discount is passed to the customer for choosing the bundle as a monthly subscription.
• They have reviews from verified buyers as social proof and a money-back guarantee to remove any obstacles to buying.

• They&#;ve

  scaled their subscription

  program with

  Upscribe

  by allowing customers to manage their own subscriptions and receive the products when they want.

Tips for successful price bundling

To create a successful product price bundle, you&#;ll need to analyze your products to see which will complement each other in a bundle. Next, you have to decide which bundling apps you&#;ll use for your store. Make sure the following fundamentals are in place to help tip the scales in your favor.

Lead with benefits not just price

Yes, customers want savings and to snatch the best deals, but for the bundle to be of real value, they need to know the benefits of the products in the bundle. Remember, the perception of value to customers is also psychological and functional. Tell them what they&#;ll be gaining from the bundle and why it matters.

Include Product Recommendations

If you&#;ve been online shopping and saw the words&#; you might also like&#; or &#; frequently bought together&#; then you know the product recommendation algorithms are hard at work. And it&#;s not in vain. Product recommendations have a 60% success rate.

Adding related products to a pending purchase is a good way to increase not just sales but the average order value as well. Customers don&#;t mind buying one extra product if recommended correctly. The rationale is that they&#;ve saved money with a discount, and they were already prepared to spend the full price. One more product won&#;t hurt. Here&#;s an example from Amazon:

Allow bundle customization

Sometimes customers want more flexibility to customize their own bundle according to their needs, and Away Travel gets it. Away sells travel essentials like suitcases, bags, and accessories.

The company encourages the customer to create their own set by choosing everything from material to colors and sizes. This gives the customer the option to customize their luggage set as they wish. They can choose different colors and even add the option of having added accessories like a USB port. This level of customization makes the customer feel like they&#;re in charge and have freedom of choice.

If you want to learn more, please visit our website bundling machine suppliers.

At Upscribe we know how important flexibility and choice are to customers. This is why we provide bundling and build-a-box features. This will enable your online store to offer subscription bundle options to your customers with flexible non-restrictive options.

Here&#;s what you can do with the build-a box-feature:

• You can set up different subscription boxes using various discount levels or pricing structures.

• You can build product bundles on Shopify, including customized bundles.

• Your customers can purchase bundles once off or subscribe for a bundle.

• Sliding discounts are applied to bundles based on how many products the bundle has

• Subscribing customers can change what products appear in a bundled product for alternative purchases.

  Schedule a demo

  to see it in action.

Remove buying obstacles

Improve chances of your bundle being a bestseller by removing buying obstacles. These are any reasons that would make a customer think twice about buying your bundle. Simple ways to remove buying obstacles are:

1. Adding reviews

97% of consumers look at reviews before making a purchase. Make their job easy by having reviews or social proof that others have bought the same bundle and enjoyed it. FOMO will work in your favor.

2. Money back guarantees

A Money-back guarantee gives your customer a good reason to click purchase. You&#;re basically telling them that they have nothing to lose by trying the bundle.

3. Free shipping

If customers don&#;t have to worry about shipping fees, they&#;re likely to spend more. This will increase your sales and average order value. You could have a threshold like free shipping on orders over a certain amount so that it&#;s practical for you and the customer.

Done right, price bundling can be the growth catalyst that your business needs to achieve its goals. If you want more insights on how to optimize your online store, check out our blog.

What Is Bundling?

Bundling is when companies package several of their products or services together as a single combined unit, often for a lower price than they would charge customers to buy each item separately.

Key Takeaways

• Bundling is a marketing strategy where companies sell several products or services together as a single combined unit.
• The bundled products and services are usually related, but they can also consist of dissimilar items which appeal to one group of customers.
• Bundled products are typically offered at discounts to stimulate demand, lifting revenues often at the expense of profit margins.
• Companies occasionally use pure bundling strategies, rolling several products or services into one item that can only be purchased as a complete package.

Understanding Bundling

Bundling is a marketing strategy that facilitates the convenient purchase of several products or services from one company. These bundled products and services are usually related, but they can also consist of dissimilar items which appeal to one group of customers.

Many companies produce and supply multiple products or services. They must decide whether to sell these products or services separately at individual prices or in packages of products, or bundles, at a "bundle price." 

Price bundling plays an increasingly important role in many verticals, such as banking, insurance, software, and automotive. In fact, some organizations devise entire marketing strategies based on bundling. Typical examples of bundling include option packages on new automobiles and value meals at restaurants.

In a bundle pricing scheme, companies sell the bundle for a lower price than would be charged for items individually. Offering discounts can stimulate demand, enabling companies to perhaps sell products or services they otherwise had difficulty offloading and generate a greater volume in sales. Over time, this approach might even help to cancel out sacrifices in per-item profit margins&#;selling an item for less means squeezing less profit from it.

Important

Not all providers will mention bundling as an option to their customers, so it is important to check whether it is a possibility, particularly as bundled services often save consumers money.

Bundling Example

If you have two insurance policies&#;home and auto, for instance&#;purchased through two separate companies, you might be able to bundle both policies together through one company and reduce total monthly payments. Bundling can also be used to switch several payments into one, making bill payments more efficient, even if it doesn't save money.

Mixed Bundling vs. Pure Bundling

Bundling usually consists of giving consumers an option to buy a set of items together as a package at a lower price than what they would pay to buy them all individually, in a process known as mixed bundling. However, there also exists an alternative, rarer form of this strategy called pure bundling.

Pure bundling does not give customers the option to buy items separately. An item that consists of several products or services must be bought as one or not at all. Examples include Microsoft&#;s Office 365 software and television channel plans. In the case of the latter, cable providers often offer packages, meaning customers cannot just pick and choose which individual channels they want to pay for.

Special Considerations

Unfortunately, many consumers, especially younger people, do not take advantage of bundling, preferring to buy different items à la carte as needs arise.

For example, young people getting their first car insurance policy typically go to their parents&#; agent and just stick with that coverage for years. Later in life, when they buy their first homes, they will often use a different insurer closer to their new residence. In the majority of cases, taking this approach makes little sense financially.

Insurance companies have significant motivation to provide more than one insurance policy to each customer. This is because it can be much more expensive to acquire a new customer than it is to keep an existing one. Thus, insurers have a strong incentive to sell a home or life insurance policy to their car insurance customers or vice versa.

What Is the Purpose of Bundling Products?

The primary purpose of bundling products is to increase overall revenue. A secondary incentive for firms is the ability to move large amounts of product, including goods and services for which consumers don't have high demand. Bundling can be deployed to sell a high volume of low-performing products efficiently.

What Is By-Product Pricing?

By-product pricing is another business strategy. To understand it, consider any manufacturing process that produces by-products. For instance, wheat germ is a by-product of wheat milling and animal carcasses are a by-product of meat processing. Byproduct pricing is when manufacturers set a price on by-products, thereby ensuring they can derive from them some revenue, in addition to profits earned from the primary product.

What Is a Price Lining Strategy?

Price lining occurs when a business prices its goods and services along a spectrum of price points. In doing so, it can market its products at a range of levels of affordability, reaching a wider set of potential consumers.

The Bottom Line

Bundling refers to a common marketing strategy, in which firms sell multiple goods and services in a single package or "bundle." The price for a bundle is then offered at a discount. For firms, this can incentivize higher revenue, though with the tradeoff of less profit margin than if each item were sold individually. Bundling is common in industries like entertainment, insurance, and software, among others.

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