Meet Mike Lollar, Chief Technology Officer and Lead Developer, at Duoplane.
1) Increase potential order value
A study from Harvard Business School reviewed a strategy Nintendo used to sell their games and consoles. Instead of selling each product individually, the company bundles two products together resulting in over 1 million dollars in revenue and over 100,000 units sold. Conversely, when Nintendo only bundled games together, sales decreased 20%.
While this phenomenon is not limited to Nintendo, the study itself shows the potential bundling has to increase order value and revenue. The main takeaway? Bundling items increases sales because it helps to increase the customer’s perceived value of products. Additionally, bundling helps increase average order value because it encourages shoppers to purchase more items than they would otherwise. This, in turn, usually results in a more expensive total transaction.
2) Get rid of slow-moving inventory
Product bundling can be a great strategy to get rid of surplus inventory or push out slow-moving inventory. The logic behind this is simple: bundle popular products with slow-moving inventory to help sell less-desirable items.
Similarly, when you stock an older product with a more popular one, you create a new product. This gives a kind of new life to your old inventory.
For example, many fast fashion retailers sell jewellery bundles with more popular items like earrings and necklaces with less popular accessories like anklets. By tying the less popular anklets to more popular and complimentary goods, these retailers are able to move more anklets overall.
3) Steer customers away from pricing individual items
Bundling can be used to provide discounts, engrain upsells into packages, or reduce price comparison shopping. All of which are effective ways of increasing revenue, as they steer customers away from pricing individual items.
We can see this psychology play out every time we purchase a new Apple product. While any of us have the correct charger at home, Apple still includes a “free” changer with the purchase of your new device. We all know that the charger is not free, rather it is factored into the final ticket price. Apple, like many other companies, chooses to include a charger, because they know that many of us would not purchase a new charger on our own given the opportunity.
Similarly, when products are left unbundled, each new product presents a new, unique buying experience for the customer. This can lead the customer to cut corners or even refuse purchasing anything all together because they feel overwhelmed. When a customer is presented with a bundle, however, even if it includes some items they do not “need,” many will opt for the single price tag in order to save time, effort, and stress.
Pricing aside, bundling allows you as a retailer to ensure that each customer receives the most upgraded experience possible. If you are selling hair tools for instance, you know that including hairspray, leave-in-conditioner, and dry shampoo, will create the best results when using your heat tools. By including these items, you are leaving customers will the best representation of your brand.
By employing a product bundling strategy, many retailers are able to increase product awareness for lesser-known, complimentary goods. These products are typically not required, but can enhance the customer experience.
For example, DIY nail polish starter pouches typically include the necessary items like polish, top-coat, base-coat, and nail file. A buffer, however, is not essential to the experience. While one is not likely to purchase a buffer on its own, when it is included in a package of necessary products, you are placing the buffer on your customer’s radar. After seeing what a buffer adds to the experience, your customer’s may make a stand-alone purchase next time.
5) Optimize shipping rates
It is no surprise that shipping costs add up, whenever it is possible, it makes sense for retailers to package items together to reduce the cost and logistics spent on shipping and routing packages.
Instead of sending out a series of small items separately, you can not only sell them all together, but package them all together as well.
The best part? You can even reduce returns (and thus return shipment costs) using the bundling strategy. It has been shown that you can dramatically reduce return rates simply by calling an item in your bundle a “free gift.”
6) Increase customer loyalty
Did you know the bundling can actually increase customer loyalty? This is because bundles offer customers the opportunity to try several products at once. As such, bundling gives buyers more chances to find items they love (and will hopefully repurchase).
Statistically, this makes sense. If a customer only tries out one or two varieties of your product, they are less likely to find one worth re-purchasing than if they had sampled six varieties.
Because bundling does most of the “work” in the buying journey for the customer, it can effectively encourage a trial and a follow-up visit to your store to re-up on their favourites.
The Art of Product Bundles
Overall, product bundling is a proven way to increase perceived product value. Additionally, it is a very effective strategy to push out slow-moving stock, increase product awareness, and enhance your customer experience.
Sometimes bundles can be difficult to manage manually. What if one of the items in your bundle is out of stock? What if items are selling quicker outside your bundle and your supply chain cannot keep up?
Many retailers opt to use a sophisticated dropship automation platform to keep inventory levels in-check. When Duoplane tracks inventory for products in an e-commerce platform, you do not want products with an inventory value of zero (out-of-stock items) to be sold. Bundles that include out-of-stock items associated with that bundle should not be available for purchase.
Learn more about how Duoplane manages bundles in our support article.