Every retailer shares a common goal: to earn more revenue.
The ways in which retailers go about meeting that goal vary, however. Some prefer to focus on their customer loyalty program. Others turn to expanding into B2B wholesale channels. And those are just two on an infinite list of tactics you can employ to increase sales.
Another great way to help retailers achieve revenue goals is product bundling.
But as with most other sales tactics, there’s an art to bundling products successfully. Here’s what you need to know.
What is product bundling?
Product bundling is a strategy in retail that involves creating and selling a curated collection of complementary products that can help you capture both casual browsers and eager-to-buy shoppers.
Sometimes products are bundled together as an upsell or a cross-sell.
- Upsells involve persuading the customer to upgrade. For instance, promoting a better, more expensive version of a makeup brush a customer is thinking about buying.
- Cross-sells involve promoting related products that are adjacent to other products in a similar group. For example, promoting conditioner with shampoo. In the world of physical retail, this is similar to the concept of cross merchandising.
With its sophisticated algorithms, Amazon suggests bundles of products that might appeal to customers based on past purchases.
For example, Amazon may suggest a product bundle if a customer bought an ebook reader in the past that includes a subscription to a digital book library.
Common types of product bundling
Product bundles become especially popular during the holidays, but it’s a tactic that retailers can use year-round to generate sales.
Generally speaking, there are three types of product bundles:
A pure bundle contains items sold exclusively in that bundle.
For example, the Dyson Airwrap is sold with detachable blow-dry heads that you can only get when you purchase the set.
This type of bundling works by combining products sold separately at a reduced price.
A good example: Kylie Cosmetics lip kits. These kits are made up of a lip liner and lipstick, each of which can be purchased separately, but are bundled together for convenience (and because they’re complementary products).
Bundle pricing is offered at a discount or with an added value, while other times price bundles are curated.
A retailer chooses a few specific items that must be bought together in order to obtain the discount, or the bundle is offered as a general discount for purchasing multiple items. Buy-one-get-one (BOGO) discounts are an excellent example of a price bundle.
By offering a bundle discount on the total price or by adding a perceived value (like a “free” item), the customer feels they got a good deal—even though they’ve likely spent more than they planned to.>
Oddly enough, curated bundles can seem like a deal to a consumer even when it isn’t saving them any money.
Examples of product bundling
Now let’s look at some product bundling examples you can learn from and implement today.
How you choose to put together a bundle will depend on your goals and individual products, but keep in mind that product bundling methods seem to be limited only by a retailer’s creativity.
One way to meet customer needs during holidays is to take a gift-giving approach to product bundles, which makes it easy for shoppers to find and purchase a done-for-you gift.
Clean beauty brand Lush uses this very approach. The gift section on its website features multiple product bundles at many price ranges.
It also merchandises the items together for in-store displays, and its hands-on associates can make smart recommendations for shoppers to get in and out of the store quickly.
Subscription boxes are product bundles in their own right—and they’re not just for ecommerce retailers. Many brick-and-mortar retailers have begun their own subscription box services.
WineCollective is just one example of a brick-and-mortar shop that has capitalized on an opportunity for product education and curation with subscription boxes.
After noticing several in-store shoppers struggling to purchase the right bottle of wine, they took the difficult decision-making out of the shopping process.
Related products bundle
Wild One, a pet goods retailer, created a Harness Walk Kit that combines popular items with less popular items. The kit has a dog leash, harness, and a waste bag carrier.
The bag carriers aren’t as popular amongst dog owners, as many tend to simply keep bags in their pocket. But by tying the bag carriers to the much more popular and complementary leash, Wild One can move more bag carriers overall.
Build your own bundles
Some retailers have experimented with a mix-and-match bundling tactic, allowing shoppers to create their own collection of goods. This may seem counterintuitive to the idea of building product awareness, but you can still encourage product discovery by allowing customers to choose from a set group of products, limiting their choices to the items you want to promote.
Nutrition and supplement company HVMN found that by offering “mix and match” bundles (which allowed shoppers to select their own flavors of their MCT oil powder or Keto Collagen+ and build out their own product bundle), its average order value shot up to $108.
Women’s fashion brand M.M. LaFleur also offers a build-your-own curated capsule wardrobe collection, which it updates regularly. When a customer purchases two or more pieces from the capsule collection, they get 15% off the items.
The brand saw a 20% increase in AOV for orders that included product bundles like sets, capsules, or bundles versus those that didn’t (excluding sale-only orders). It also saw a 27% increase in items per transaction with orders including sets, capsules, or bundles.
This tactic isn’t limited to online retailers, either. A retail store owner could take a similar approach by hosting a build-your-own gift bundle event or allowing in-store associates to help shoppers build their own bundles, with in-store gift wrapping available, too.
Inventory clearance bundling
Bundling slow-moving inventory with popular products can help move stagnant items. When you bundle a more stagnant product with a popular one, you’re creating a new product offering, which helps freshen up your old or overstocked inventory.
For example, a clothing retailer could bundle three slow moving items, like sandals and sunglasses, with a popular item like a dress, and offer the bundle at a lower price. This could encourage customers to save money and buy the bundle.
How to create a product bundling strategy
The process of creating a product bundle can vary quite widely, depending on the bundle, but there are some important principles to follow.
Decide what to bundle
The products you choose to bundle will be determined by the bundle type you choose to accomplish your goal.
Let’s look at how to choose bundled products:
- The buy-more-save-more bundle is typically applied to your entire online store or to select product lines that you carry. This technique is particularly useful for driving sales of stagnant inventory. Most often, you will choose the items for this bundle based on what your slowest moving inventory category is.
- Quantity discount bundles are intended to sell multiples of the same product. Here you choose which replenishable items you want to promote. You could choose the replenishable items based on bestsellers to increase AOV. You could also experiment with seeing if quantity discounts help move stagnant replenishables.
- Leverage data. Because pre-packaged kits are most effective for products that are complementary or meant to be used together, choose items that your data tells you are commonly bought together. For instance, if you have a history of customers purchasing socks with shoe purchases, that’s a solid indicator that you have an opportunity to sell a bundle.
Don’t overdo it with the bundling strategy. Pick one or two approaches and lean in to those to ensure you’re not overwhelming your customers.
Brands should choose one or two of the many bundling techniques to focus on in their pricing and promotion strategies. All pricing techniques are not created equal. Some methods will be more effective depending on the products bundled.
If you’re still unsure of where to start, analyze your stock-to-sales ratio to discover which products or categories are stagnating.
To calculate stock-to-sales ratio of a product, calculate the contribution a SKU or category makes to your total unit inventory and compare that to its contribution to your total unit sales.
Stock-to-Sales Ratio = Percent of Stock ÷ Percent of Sales
Calculate bundle price
Calculating your bundle’s pricing can be straightforward if you’re not offering any discounts.
To calculate the bundle price, you first need to know your gross margin on each product in the bundle. To calculate gross margin dollars of a product, subtract the cost of goods sold (COGS) from the total selling price.
Gross Margin Dollars = Ticket Price - COGS
Once you know your cost baseline, you can choose a discount that works for your brand (if you’re offering one). A few rules of thumb for discounting:
- For brands with average margins 50% or higher, shave between 10% to 20% off of the subtotal.
- For businesses where average margins are 50% or less, a discount rate between 5% to 10% typically will suffice.
It’s also worth testing your chosen discount over time to see what performs best.
Name your product bundle
Naming your bundle impacts how you draw attention to your new offering.
An excellent naming best practice is to call the bundle by the benefit it provides a customer. For instance, belif’s skin care bundles are all named for what they do.
The skin care bundle for dry skin is called Our Belief for Dry Skin.
Calling attention to the overall benefit of the bundle tells customers from the get-go why they should purchase all of these products together rather than just one of them.
Use a Shopify app
There are many apps that work directly in your Shopify admin to create product bundles. Here are three, in no particular order, you can use to boost sales with bundle discounts:
EARLY ACCESS: Shopify's new app, Shopify Bundles, will allow you to easily create bundles directly in Shopify admin with the products and variants you choose. If you're a Shopify merchant and would like to be considered for early access, sign up here.
How to sell your product bundles
There are a host of ways to promote your product bundles, but let’s take a look at some of the best practices retailers have developed over the years.
1. Display the discount information prominently
If your bundle is intended to offer a discount or value-add, it’s important to display that information prominently on your product page and within your marketing efforts. Making the discount a key part of the bundle reminds shoppers they’re getting a good deal.
As an example, women’s undergarment brand ThirdLove prominently displays its build-your-own-bundle promotion on nearly every page of its site and highlights the cost savings.
Retail store owners will want to clearly display signage near their bundled or bundle-able products so customers recognize the deal, too. Sales associates should also be trained to mention the bundle as an option whenever a customer is looking at one of the individual items.
2. Use your bundles for gift guides
Another classic method is to promote bundles around holidays as easy gift options.
Many companies will create a gift guide landing page, which you can then promote via email, social media, and in-app. Here’s one example from mattress company Purple promoting its bundles as Valentine’s gifts:
Retail store owners can spotlight gift bundle displays by their registers with shoppable displays so customers can grab everything they need in one swoop.
3. Offer your bundles at checkout
Offering a bundle at checkout can help a customer pull the trigger on multiple items. It’s also a smart move for ecommerce stores to increase profit margins and optimize their shopping cart experience.
A lot of brands offer subscribe-and-save discounts, but some consumers these days are wary of that; they want the savings, but don’t want to track subscriptions on dozens of different sites. Bundles are a happy solution and work especially well when promoted at checkout.
At a brick-and-mortar, that may look like the sales associate mentioning that if the customer adds one more item to their purchase, they get 15% off everything. Online, it can be presented as messaging during the checkout flow.
Benefits of product bundling
Product bundling is a win-win for both retailers and consumers. Let’s look at a few reasons it’s become such a popular tactic amongst retail and ecommerce businesses.
1. Boost sales
How does bundling items increase sales? Because it helps increase the perceived value of products in your customer's eyes.
Harvard Business School’s Vineet Kumar revealed the power of product bundling in a case study of video game console retailer Nintendo. Still today, retailers increasing their sales and AOV from bundling include:
- Intimacy lubricant brand Coconu saw a 20% increase in AOV since implementing bundles.
- DTC dog food brand Maev’s bundles resulted in a 15% increase in AOV and 20% jump in unit per transaction.
Encouraging shoppers to purchase more items typically leads to a higher transaction amount, which is an efficient way to boost revenue. Bundling also reduces marketing and distribution costs, since customers discover products easier and order all of them at once.
2. Pricing opacity
While bundling can be used to provide discounts, it can also be used to build upsells into a package, thus blurring the focus around the price of individual items.
For example: when you purchase a new smartphone, you also receive a charger in the box. The charger isn’t free, of course. Its cost is built into the phone’s final ticket price. Phone retailers know if customers had to purchase a charger separately, many wouldn’t. Most of us already have the correct charger at home.
If you find that customers are often put out at the thought of having to purchase yet another small item to complete their set or experience, consider bundling those items to remove that obstacle to purchase.
3. Increase product awareness
Product bundling also gives customers the chance to try a product they wouldn’t have typically purchased as a standalone item.
For one example of this, we can look to LoveSeen, a false lashes retailer. It sells a starter kit bundle that includes not only lashes but also lash glue and lash tweezers.
Most people don’t try lash tweezers because they’re not entirely necessary to the process of applying lashes. However, when sent within the product bundle, customers have the chance to see how much easier lash tweezers make the application process. They may even discover that they would purchase another pair individually in the future.
4. Boost customer loyalty
While it may be a surprise, offering product bundles can also help boost customer loyalty. The reason: bundles give buyers the chance to try multiple products at once, which means more opportunities for them to find items they love (and then buy over and over again).
Create product bundles for your store today
Product bundles are a great way to increase the perceived value of your products and improve the customer experience in your store. Use them for gift-giving occasions, dead stock, product awareness, and other creative ways to drive more in-store sales and improve your marketing strategy.
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