When it comes to sales, you probably have heard the mantra, “Always be closing.” However, the value presented by a single product only represents 90-95 percent of what you need to make a sale. You can fail to sell even a great product unless you present your offering to your customer in a way that demonstrates your value.
Sales experts utilize a handful of techniques built to “help” the client make the “right” choice. One of those techniques is “product bundling.” When done right, bundling will help your sales and prevent you from ever having to unbundle your offering.
This article covers what bundling is, the different types, its benefits, and how you can implement it within your product team.
Bundling occurs when you offer multiple products or services together as a single package. That often comes with a discount when compared to purchasing each item separately. This sales approach is widely used to drive sales, increase perceived value, and encourage customers to purchase items that aren’t as compelling separately (e.g., bundling niche TV channels together, when you really want to watch only a handful of them).
Bundling is particularly beneficial in competitive markets, where any leverage over competitors can translate into finally hitting your sales goals. Additionally, bundling allows for greater pricing flexibility and can enhance overall profitability by increasing the average transaction value.
Understanding the different types of product bundling strategies allows you to select the approach that best fits your market, both from the business and client side. The most common ones include:
This type of bundling offers products exclusively as a package, with no option to purchase items separately. This strategy is ideal when bundled products complement each other closely and are designed to work together seamlessly. Another case is when some elements of the package are so unattractive on their own, that they would hardly ever be purchased separately (say, a TV channel about fishing).
For example, Salesforce Essentials bundles multiple CRM tools meant to work together, providing a comprehensive solution for businesses without the option to buy those tools separately.
The mixed type allows customers to decide whether to purchase items individually or as part of a bundle. This approach caters to a wider audience by accommodating different customer preferences (say, having the ability to buy HBO separately or as part of your TV bundle).
Adobe’s Creative Cloud uses this approach. It offers individual software subscriptions or discounted access to the full suite, allowing for both specialized users and those needing multiple tools to find the right offer.
Mix-and-match allows customers to create their personalized bundles by selecting from a range of products. This personalization is probably one of the most client-friendly ones, as users can reduce the products’ price while choosing only those elements that bring value to them.
An example of this would be when TV companies finally stopped pushing a phone landline with every service bundle.
This version of bundling combines complementary products from different categories Here, you aim to encourage customers to try related offerings they might not have considered. In other words, you might get a free, additional product (at least for a time), to increase your intended purchase’s value.
For example, purchasing a YouTube Premium subscription gives you free access to YouTube music. This is Google’s very successful strategy that has kept me away from Spotify for years now.
As the name suggests, subscription bundling offers products or services as recurring packages, often with a discount. This strategy builds customer loyalty and ensures steady revenue over time.
An example here would be Disney’s Hulu, Disney+, and ESPN+ bundle that provides access to all three streaming services at a reduced price compared to subscribing to them individually.
Implementing product bundling can help your bottom line and expose previously sidestepped products to your users. Alongside this, bundling comes with these benefits:
When offering additional products at a discount within a bundle, the value of the order rises. As long as the product doesn’t come with significant cost to the developer and the sales margin remains great, the LTV of the user increases notably with a bundle. This is an even bigger benefit if the purchase is subscription-based and continues for years to come.
Bundling complementary items, when done right, can bring much more joy and/or value to the user. To allude to a previous example, perhaps you wouldn’t buy that fishing channel without a bundle, but then you realize you love watching someone reel in a bluefin.
Bundling can help to monetize less popular products by pairing them with popular items, reducing excess inventory and associated carrying costs. For software products, it can help cover the maintenance cost of a less popular service that still has a loyal fanbase. After all, if people don’t watch the fishing channel, no one will buy their ads and the channel will drown.
Unique, value-packed bundles allow you to offer better value than competitors. This makes your products more attractive in the market. The aforementioned Disney’s Hulu, Disney+, and ESPN+ bundle most likely helped the Mouse catch up a little to Netflix, given that the streaming leader doesn’t really offer any sporting events.
To effectively implement this sales strategy, consider the following steps:
Start by listing what products and services you are able to bundle in the first place. Those can be first-party offers, but you may also contact your market partners and seek potential alliances that help you build the right offer.
Whether this translates to looking at Excel data or a long workshop with your sales team, you need to look at how the sales of different products went historically to determine what customers bought together.
With all the data in front of you, develop bundles based on popular customer pairings and consider seasonal demands to maximize relevance and appeal. However, as no plan has ever stood steady when faced with the enemy, treat those as test offers.
Use A/B testing to experiment with different pricing strategies and product combinations to uncover what works and what doesn’t work. Be sure to monitor both the bottom line and user sentiment. While the test bundles might be successful in the accountant’s short-term view, you shouldn’t sacrifice users’ trust and loyalty for that.
Ideally, clients should love the bundles and see them as pro-consumer while also enriching your financial results.
Office 365, launched by Microsoft in 2011, marked a strategic shift from traditional software licensing to a subscription-based model. While users didn’t really embrace this offer initially, in time it was the only way to continue using the most popular office software.
Ultimately, this bundle proved to be highly beneficial to users by providing up-to-date applications, cloud storage with OneDrive, browser, and cost-effective and scalable bundled payments.
The suite includes core Office applications like Word, Excel, and PowerPoint, cloud services such as SharePoint and Exchange Online, as well as robust security and compliance features. It also comes with OneDrive space and one hour of free land/mobile calls via Skype per month.
For product managers, the Office 365 story offers valuable lessons in bundling by:
Overall, Office 365’s evolution demonstrates the power of strategic bundling in delivering value, fostering loyalty, and adapting to changing market dynamics, providing a blueprint for successful product management.
Product bundling is a powerful sales strategy that can help boost your profits and reputation. By strategically combining products, you can offer greater value, increase average order profit, and stand out in a competitive market.
As a product manager, leveraging data-driven insights to develop bundles that meet customer needs is essential. By understanding your customers and continuously refining your bundling strategies, you can drive growth and build lasting customer relationships. Thank you for reading and see you in the next piece!
Featured image source: IconScout
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