Product bundling is the new e-commerce obsession. And, for all the right reasons!
According to a Harvard Business School Study, Nintendo uses mixed bundling to boost unit sales by as much as 100,000 units with a single campaign.
Source: ScienceDirect
But do you ensure you still remain profitable when providing bundled items at such steal deals to your customers?
That’s where the bundle pricing strategy comes in.
The pricing strategy of your product bundles can either help you double your revenue or start cutting into your profits.
What is Bundle Pricing?
Source: Omnisend
Bundle pricing is when merchants take two or more products and sell them together at a lower price than if they were purchased separately. This tactic prompts consumers to buy bundles as they offer a good deal over single purchases.
By selling product bundles, retailers can increase their order value per sale and move closer to their revenue goals. For instance:
A computer store sells these items:
- Laptop: $800
- Mouse: $30
- Keyboard: $50
- Laptop bag: $40
The store makes up a “Work–From–Home” bundle that comprises all of these items and offers it for sale at $875. Customers find this particular bundle attractive for various causes:
It encompasses everything required to set up an office at home.
It’s convenient for customers not to search for individual pieces of things.
When the bundle is bought, customers save forty-five bucks.
Additionally, by bundling slow moving goods like laptop bags with popular ones, the store also benefits.
Although bundle pricing may cut profits initially, Shopify stores can make it up by selling more bundles hence increasing long-term revenues.
Why Is Bundle Pricing Effective?
According to McKinsey, 35% of all Amazon purchases come from the product recommendation section, which often includes the “buy it with” bundles.
Source: Amazon
Product bundling is a great way to grow your business and give customers something they can touch. The key is to find the right mix of products that will benefit both parties involved – this means more sales for you and better value for them.
Let’s look at some of the benefits of bundle pricing in detail:
1. Offloading Less Popular Products
Retailers can use bundle pricing to rid themselves of slow-moving inventory. This involves bundling slow-moving items with the best-selling ones so as to get rid of dying stock. In this way, a customer is introduced to something that he or she would not ordinarily consider purchasing.
2. Increasing Customer Spend
The value of bundles usually makes customers buy more than what they had intended.
Instead of just buying one thing, customers may go for a package that contains many items at an affordable price. This helps retailers increase their average order values by effectively using the technique of upselling customers.
3. Simplifying Shopping Experience
Product bundles make shopping easier.
By grouping complementary items, retailers save customers time and effort.
For instance, gift bundles are designed to make gift-giving easier, these curated sets often revolve around themes or occasions.
They save shoppers time and decision-making stress, especially during busy gift-giving seasons. These bundles often come in attractive packaging, adding to their appeal as ready-to-give presents.
4. Attracting Deal-Seekers
Did you know coupons and discounts (39.3%) are the second most encouraging factor for people to shop online?
Bargain hunters love bundles.
Attractive bundle deals should be able to lure in even non-traditional bargain shoppers into your doorsteps; hence expanding your market base and increasing total sales volume for any season.
5. Launching New Products
Bundling helps introduce new products in the market quickly and efficiently. By doing this, a retailer will be leveraging popular products that are available already so as to attract attention towards the new ones.
The idea reduces risks involved in rolling out completely new products lowering initial sales numbers at an early stage.
How To Calculate Bundle Pricing?
Calculating effective bundle pricing involves strategic decision-making based on data analysis. Here’s a step-by-step guide:
1. Select Products for Bundling
Rely on data as you decide which products to pair together.
Check customer behavior, purchase history, and product metrics of performance. This eliminates guesswork and identifies combinations that can push sales.
The following key factors should be considered:
- Complementary products
- Popular items coupled with slow-moving stock
- Seasonal relevance
2. Determine Optimal Pricing
It is a given that the price of bundles must be less than the cost of individual products.
Here, the magnitude of the discount has significant implications on sales. For instance:
- 10% discount: Most customers would rather buy separate products.
- 45% discount: Bundle preference goes up sharply.
Find a sweet spot that draws customers while remaining profitable.
3. Set Bundle Size
The number of items in a bundle should correspond with the pricing strategy. But, generally speaking:
- High-priced goods: Smaller bundles work best
- Low-priced goods: Bigger bundles perform better
4. Analyze Competitor Strategies
Research competitor offerings in bundles and discounts provided by them on their websites. That information will help you refine your approach and keep you competitive in the market.
5. Use Data Analytics
Combine browsing information and shopping cart data for analysis purposes. This provides insights into what customers prefer and how effective your bundle is.
6. Trial and error
So as you put into place a bundle pricing strategy, monitor how it is performing. Be ready to alter your tactics based on what sales figures and customer feedback say.
7. Profit margin considerations
Make sure that the offering of bundle discounts does not reduce the profit of the company significantly. Do a thorough analysis of how much different combinations could impact overall margins.
Different Bundle Pricing Strategies You Should Look Into
It is commonly assumed that bundling is just simply adding 2+ products in a pack and your sales will magically multiply. But there are so many different kinds of product bundle pricing types –
1. Fixed Discount Pricing
This strategy involves providing a fixed amount of discount in relation to the costs of individual items.
For instance:
A laptop ($800), wireless mouse ($50), and laptop bag ($70) are bundled in an online electronics store.
- Individual total: $920
- Bundle price: $850
- Fixed discount: $70
The method is simple and easy to grasp the value by customers.
2. Percentage Discount Pricing
Applying a percentage discount on the total value of items in the bundle.
For example:
Three supplements (all priced at ₹780 each), have been bundled by an e-commerce health and wellness retailer.
- Total value: ₹2340
- Bundle discount: 10%
- Final bundle price: ₹2106
This approach can provide more perceived value for money to customers, especially in cases of high-priced bundles.
3. Tiered Pricing
Offer multiple options at different price ranges for bundling.
For example:
Online fitness shop provides equipment bundles such as;
- Basic ($99): Resistance bands, jump rope, workout guide
- Standard ($199): Everything in Basic + dumbbells and yoga mat
- Premium ($299): Everything in Standard + kettlebell and foam roller pair
In this way, different customer requirements and budgets can be served through this pricing model hence potentially boosting overall sales.
4. Buy One, Get One (BOGO) or Buy One, Get More
This is a simple strategy – giving free or reduced-priced products when another one is bought.
As per a survey by AMG Strategic Advisors, 93% of customers prefer Buy-One-Get-One (BOGO) bundles.
For instance, buying any bestseller and getting a classic novel free is what an online bookstore has.
This will increase sales of particular products or expose customers to new ones.
5. Mix and Match
Customers can combine products from a range of choices to make their own packages. The idea here is to first find the total cost of packaging all items, then add a margin.
Example:
A skincare e-commerce site offers “Choose any 3 products for ₹999” from a curated list.
This allows customers to have more control and might boost perceived value.
6. Psychological Pricing
Use different prices and promotions to make bundles more attractive.
For example:
Rather than selling it at 500 dollars, an online electronics store prices a smart home bundle at 499.99 dollars.
Different examples include:
- Charm pricing: instead of 10$ they use 9.99$
- Prestige pricing: Instead of 999.99$ for deluxe bundles they utilize $1000 for luxurious ones
In any type of combination, this method can be used to improve perceived value and stimulate buying behavior.
7. Dynamic Bundle Pricing
Adjust bundle prices based on real-time factors like demand, inventory levels, or competitor pricing.
For instance, an online travel agency dynamically prices flight + hotel bundles based on current demand and availability.
This strategy maximizes profitability and can help manage inventory in e-commerce.
Did you know Amazon is a pioneer in dynamic pricing and makes over 250 million price changes every day? The average product’s price will change once every 10 minutes based on demand and search volume.
8. Subscription Bundles
These create ongoing relationships with customers.
A gourmet food shop might offer a monthly “Chef’s Selection” box of ingredients. Subscription bundles provide predictable revenue for businesses and convenience for customers.
They often include an element of surprise or curation, keeping customers engaged and looking forward to each delivery.
9. Freemium Bundling
Include a free or heavily discounted item in the bundle to increase perceived value.
Example: An online beauty store offers a skincare bundle:
- Cleanser, toner, and moisturizer: $80
- Plus a free sample-size serum (usually $15)
This strategy can introduce customers to new products and increase the bundle’s appeal.
Source: Nykaa
10. Cross-Category Bundling
Combine items from different product categories to encourage diverse purchases.
Example: An online bookstore bundles a bestselling novel ($20) with a branded bookmark ($5) and a small reading light ($15):
- Individual total: $40
- Bundle price: $32
This approach can introduce customers to new product categories and increase overall sales.
Set Up Product Bundles In Your Store in Under 5 Mins!
We’ve already discussed the amazing benefits product bundling can have on your bottom line as well as customer satisfaction. It’s time to leverage these benefits in your Shopify storefront.
Lucky for you, setting up product bundles and its pricing on Shopify stores just got easier. Introducing the Appstle Bundles app!
With Appstle Bundles, you can:
- Easily create, manage, & customize bundles, quantity breaks, & discount options
- Choose from many bundle types: classic, combo, mix & match, advanced, & more
- Smartly upsell with multiple discount types and conversion-optimized templates
- Seamlessly integrate with subscriptions & recurring orders, & other Shopify apps
- Benefit from hands-on 24x7x365 migration and post-installation support
