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Product bundling: How it works, optimization tips, and examples

Product bundling is a popular way for e-commerce sellers to sell more of their products, and in turn, increase their profits. This article goes over the psychology behind it, a few tips we've learned from industry experience, and examples of some brands that do it well.

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If you are looking to learn more about what sort of product bundling strategies work best, what mistakes to avoid and which e-commerce companies have been effectively utilizing such selling technique, then read on.

But first, let's start with a quick definition.

What is Product Bundling?

Product bundles are several individual goods or services that are sold to consumers as one combined package. An example of a product bundle would be a beach kit that includes sunscreen, sand toys, flip flops and towels as one  item.

The Psychology of Bundling

Mixed product bundling is when a brand combines items they sell separately into a bundle, along with a special price. This way, buyers can choose to purchase one or two items, or multiple together in a "bundle." Let us explore why this strategy works for your bottom line, and how to incorporate it with your existing marketing strategies.

A study done by Vineet Kumar, a Harvard Business School, discovered that when video game giant Nintendo used mixed bundling to sell video game units, the sales of video game units went up by 100,000 units and video game sales went up by more than a million. Conversely, when Nintendo tried pure bundling - wherein they force the customer to buy the bundle package only -  their sales went down by 20% and resulted in a decrease of sales in both video game consoles as well as video games themselves.

With this in mind, we see that the secret sauce to product bundling would be to find the right mix for your bundle package or to use mixed bundling. In order to understand how to find the right mix, it’s important to first know about customer value perception.

Customer value perception refers to the value that the customer puts into the goods. Customers, in general, will favor products that they value. They will always go for the product that will seem “worth it.”

With this thinking, we should always create a bundle mix wherein all products are of value to the customer and also cheaper altogether than when they are bought individually. The next thing to think of would be the type of products to put. Always add products that compliment each other or can be used together, such as the example of Nintendo's consoles and games bundle.

Which Products Can Be Bundled?

Bundle products that compliment each other or can be used together. Your product bundles must make sense. For example, if you are selling a computer, you can add a product like a free USB or computer screen cleaner.

Another tip would be to find out what the customers want from customers themselves. This is especially important when you do e-commerce selling, and bundles help you outshine your competition.

Through customer data and product performance analytics, you’ll be able to tell what products a person is buying. You may also track the other items they purchase frequently to see which products make sense together.

For example, you have seen buyer A buy a bottle of shampoo from your store. You also see that buyer A also bought a canister of hair spa treatment that you’re also selling.

This data shows you that you can bundle these two products. To leverage your data better, find something that allows you to incorporate full suite e-commerce analytics to provide better insights and measure the performance of your A/B tests.

5 Product Bundling Tips for 2020

Now that we know the skinny on how to bundle, let’s now go on to the more specific tips on how to do that:

Tip 1: Give Different Bundled Packages for Your Products

Provide a diverse range of bundles for your customers to choose from. They'll get ideas for how to use the products, which products to use their purchases with, and how to resell it if they choose.

Tip 2: Emphasize Savings

One of the most attractive things about bundle sets is that the products end up cheaper as a bundle than when you buy the products individually. This is good for consumers who are always looking for a buy that is worth the money. When you sell, emphasize in figures or percentage how much they can save with the bundle.

Tip 3: Offer Bundle Promotions at the Checkout Counter

Have you ever been offered a bundle by a cashier at a store? It could be "oh if you get a second item, your third is free" or "you can get [insert relevant item] for 50% off with this." This is because they want you to make a quick decision on whether you want something that will make your purchase more worth your money.

When you are doing e-commerce selling, this also works wonders. When the customer clicks on the Checkout button, the next page could display another product that would add to your bundle and make their purchase more valuable for less money. Once again, the key here is to add a product that is valuable to the target customer. Amazon is a website that has perfected the product mix formula and is an example of an online marketplace that does this well.

Tip 4: Display Bundle Sets

Make sure that you display your bundle sets where your target customers can see them. In online marketplaces and in independent websites, it’s important to showcase your bundles the moment your target viewer boots up your page. The most crucial thing about this tip is to gain as much exposure as possible. The more you promote your bundles, the more your potential customers will be exposed to it. This way, they can decide whether they would want to avail or not.

Tip 5: Create a Separate Section for Value Packages

When selling on your website, try creating a separate page for your value packages. Any shoppers hunting for deals or who want to save some money will flock to this section to check out your product bundles. Consider having unique bundles that change over time, such as a “bundle of the week” promo or a “holiday bundle."

Bundling for Resellers

When we think of product bundling, we usually think about direct-to-consumer sales from a single label or brand. However, product bundling comes into play in e-commerce when resellers are shopping for goods to sell on online marketplaces such as Amazon or eBay.

These marketplaces can suggest bundles for you to create in your page, and sellers are able to place bundle packages in separate posts from original product posts. Place original product posts in your account then add in some bundles later on. One of the best things about re-selling on Amazon or other marketplaces is that you can bundle products from different brands.

4 Examples of Good Product Bundling

There are many online brands already benefitting from product bundling. Here are a few examples to name:

1. Netflix

Netflix is one of the biggest brands that make use of bundles in their services. They usually offer their subscription services in conjunction with broadband services, data plans, and social media plans. Their partnership with internet and telecommunications providers enables the team to create bundles that can mutually benefit both parties.

Image Credit: Consumerist

2. Naturebox

Naturebox is an innovative company that sells healthy snacks online. They usually bundle different snacks together in one package to boost value for their customers' money. If you are a health food enthusiast, then the Naturebox bundles can help to encourage healthy snacking.They also do promos and giveaways of snacks to those who enter their contests.

Image: Jody Find Deals

3. HelloFresh

HelloFresh is a company that sells healthy ingredients that go into a meal you cook at home. This is a successful example of a pure bundle method that doesn’t seem like it’s a pure bundle. HelloFresh is known to bundle ingredients that would help customers make a healthy meal. This is a very attractive package that is great for health enthusiasts.

Image: HelloFresh

4. Amazon

Amazon, as mentioned above, continues to perfect its algorithms for online sales. Amazon has mastered the art of bundling and came up with a way to suggest bundled products on their site. Amazon makes money this way, since they make profits from their sellers' revenue.

Image: Amazon

Product bundling is a time-tested method of selling products both in-store and online. As the art of selling evolved over time, bundling products became more and more relevant. Up until the digital age, product bundling has become much more relevant than ever because of the many competitors that can be found on the internet. With the number of competitors increased in the playing field, entrepreneurs have to think of ways on how to further innovate their products to make it more attractive to their potential clients.

With the number of competitors increased in the playing field, entrepreneurs have to think of ways on how to further innovate their products to make it more attractive to their potential clients. One of the most effective ways to do this is to bundle products to make your packages cheaper and more valuable than your competitors. When done properly, having a product bundle is an efficient and effective way to boost sales.

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