Product bundling is an effective, yet often underutilized strategy for boosting average order values and sales margins. Ecommerce companies like NatureBox and BirchBox have adopted bundling as their core business model, using shopper preferences to deliver personalized, bundled selections for every customer.
You don’t have to be a ‘bundle-only’ online store to take advantage of the benefits of bundles and add-on recommendations. More ecommerce stores are working the strategy into their everyday sales efforts.
Benefits of Bundling:
- Offset acquisition costs with larger shopping carts
- Higher customer lifetime value
- Personalized and enhanced customer experience
- Convenience and value for buyer
Online stores can use a combination of bundle strategies, including bundles as a package, related product recommendations while buyers are shopping, and a cross-sell pitch during check-out. We’ve outlined best practices for each.
The right kind of bundles involve products that fit well together and make inherent sense to the buyer. Product bundles are typically sold at a discount in order to raise the perceived value of buying multiple products at one time. Good bundles often add a complimentary high margin item to a low margin purchase that will give the buyer greater value and add to your bottom line. There are two types of packaged bundles:
Mixed Bundle - Products also available as individual units.
Pure Bundle - Products not available for purchase separately.
Take a cue from research which shows mixed bundles have a higher rate of success. A study by Harvard Business School found when video game units and games were offered as a mixed bundle, sales soared. But when offered as a pure bundle, available only as a package deal, revenue dropped by 20%.
Tips for Packaged Bundles
1. The most common types of bundles involve grouping main products with accessories or similar products. Running shoes could be paired with socks and a water bottle. In this example, a camera is bundled with accessories like an SD card, light and a camera case.
2. You can use bundling as an opportunity to get creative in developing new products from overstocked inventory or dated items. For example, you could take a golf shirt that’s not selling well on its own and pair it with with golf tees, a visor and water tumbler to make a Father’s Day gift basket. 3. Consider throwing a freebie into your bundle to encourage the purchase of a higher priced item. For example, add a free pound of a coffee with the purchase of an espresso machine.
Recommending products related to a buyer’s initial purchase is another bundling strategy that can increase conversions and bottom line results. According to Monetate, product recommendations can:
- Increase revenue up to 300%
- Increase conversions by up to 150%
- Increase average order value by as much as 50%
Impressive numbers like that don’t happen without a data-driven strategy for related product recommendations. This begins with identifying what each shopper may be looking for at specific points of the conversion funnel. Product recommendations should be in the context of the shopper’s behavior and not distract them from the buying cycle. For example, if someone is looking at duvet covers, pushing related products like pillow shams and bedskirts could distract from the process of deciding on the main purchase. Instead, recommend related duvet covers that can help the buyer hone in on a favorite.
It’s never too late in the buying cycle to use bundle strategies, including cross-selling efforts during the checkout process. Cross-selling is profitable for sellers but also benefits the customer, making it easier to buy useful add-ons in one place and save time. The intuitive cross-sell strategy used by Apple.com is part of the flow of the online checkout process. After shoppers put an iPad Pro in their shopping cart they are taken to a page featuring iPad accessories that can be added before checking out.
Tips for Cross-Selling
1. Understand your customer before cross-selling. Relevant cross-sells may differ for varying groups of customers. For example, cross sell offers for photography products will differ for amateur and professional photographers. By analyzing customer data, you can make a more personalized cross-sell pitch. 2. Cross-sell offers should sound natural. Shoppers pay more attention to buyer recommendations than store offers. Use promotions such as “Customers who bought this also bought…” and “Items frequently bought together…” to create neutral party cross-sell pitches that sound natural to the buyer.
3. Don’t cross-sell additions that are too expensive. The price of cross-sell products should be correlated to the cost of the main purchase and are often less expensive than the initial product.
If you’re ready to work bundles into your ecommerce game plan but need some help, there are a number of tools and apps you can choose from. WooThemes offers a Product Bundle Extension that allows store owners to quickly build complex product bundles or create simple discount combos. If you’re on the Shopify platform, you can find automated product recommendation apps in Shopify’s App Store. Magento users can choose from Related Products and Frequently Bought Together extensions that automate cross-selling strategies. Glew’s Merchandise Dashboard recommends best bundles based on past customer purchase behavior.
Finally, don’t forget to analyze data in order to spot patterns in product combos that are popular and most profitable. Based on what you see is working, you can be selective about what and how you market for future bundle success.