Are you struggling with a slow-moving stock? Or products that aren’t moving at all?
You’re not alone. Many SMBs find it hard to sell their stocks, or to sustain a certain level of sales volume. The competition among many players in the market forces businesses to combine multiple marketing strategies.
Product bundling is one of them. Retailers combine several products in one package and make it a better deal via several types of attracting offers. When it’s used correctly, it can boost your sales and improve your conversions. You can combine it with other marketing strategies, and it’s not actually costly.
Since it’s an effective strategy on so many levels, it’s worth trying. In this post, we’ll talk about the building strategy, how you can benefit from it, and the examples to help you understand the difference between a well-combined product bundle and a bad one.
What is product bundling?
Product bundling is a marketing strategy where several products are sold as a package. Usually three or more, the bundled products can be related, similar, or multiplies.
In some cases where there is a specific audience, say, kids, the bundled products don’t have to be related or similar. Think of the Happy Meal. The toy and the food are in a bundle, and the toy is not related to any of the items in that bundle. However, the audience loves both, therefore it works.
While bundles can be presented as an option, it’s also possible to offer some products only within bundles. In the first scenario, logically, the price of the bundle should be at least a little cheaper than the total amount of the bundled products’ separate sales prices.
What’s the use of bundling?
It’s a marketing strategy that helps sellers get rid of dead or slow-moving stock and increase the average basket size.
First of all, bundles help businesses draw attention to their low-demand products without significant cuts in prices. People tend to forget peripheral products if not exposed to them, but product bundles solve this problem.
Say, a person is buying a cycling computer from your store. In case she’s a new cyclist, she might also need sensors and mirrors. However, the possibility that she’ll forget to buy them now, and buy them later from a different store gives retailers an incentive to offer these products in bundles. Why would she bother coming to your store again? The reasonable thing to do is bundling peripheral products to make sure customers see them.
More to that, it’s practical. We know that consumers want an easy shopping experience. Time is a valuable resource that many people avoid wasting. What if a shopper looks for a capsule espresso machine and a milk frother. Bingo! You just offered him a perfect bundle with a discounted price, and he didn’t have to spend any extra time searching for it.
How to avoid its single risk?
There is no specific downside to this strategy, but you need to be careful about one issue. When you give a discounted price for a bundle, the average profit per unit drops. It cuts into your profits, and if you didn’t plan ahead, you might not be able to afford the decrease. Optimizing the price-demand ratio is not an easy task, but it’s also necessary. You need to have a good pricing strategy.
A guide to pricing the bundles
Then what’s the criterion when setting the price of your bundle?
First and foremost, be sure that your costs are covered. Big companies can benefit from lower profit margins since they have incredible sales volumes. Think of Walmart. The giant benefits from economies of scale and reduces supplier costs to a minimum.
SMBs can’t lower the costs as much as a big company. What SMB owners need to do is to set a price that’ll yield a high demand, but at the same time, generate a reasonable revenue.
Competitively price your products. What if you price a bundle of three products and it turns out that a competitor sells a bigger bundle with a better deal. It will look like you are trying to deceive your customers, which is the last thing you want.
To compete on price, you need to know competitor prices. This is where the pricing software comes in.
How does the pricing software help?
The software automates the price tracking process. When done manually, it takes approximately 20 hours for a small-sized business. The average American worker earns $27 per hour, meaning a single task costs more than $500.
Furthermore, many retailers change the price of a product several times a day. The information you’re manually collecting may be irrelevant by the time you’re done.
Yet, if you have the most up to date information, you’ll be able to offer the best deal. How so?
Pricing software not only collects price data, but it also provides smart pricing rules that constantly adjust prices against competitors’.
We’ve talked about the importance of covering your costs because we don’t want you to go bankrupt. Smart pricing rules can also limit the discount to a point where the price still covers your costs. Moreover, you can set the profit margins with an additional rule.
The software also collects stock information so that you know when competitors are out of stock. It’s the perfect timing to offer a good deal and lure their customer base.
How to decide which products should be bundled
Suppose you sell PC, its accessories and peripherals.
Now, let’s say one of your laptops sells more than all the other products in that category. To be precise, you sell 250 of this model per month, and the closest competition remains at 150. There is a best-seller mouse, and you decided to bundle a mouse and a laptop. If you bundle the mouse with the best-seller laptop, the number of people who see the offer will likely be higher.
However, it’s not necessary to put best-seller products together. It depends on your target market.
What if a large portion of your consumer base likes to shop from a single brand? A teenager might like having Apple-branded products, and her father might enjoy using Lenovo’s products. Both would like to purchase single-branded bundles rather than best-sellers. You can either analyze your sales data and get to know your consumer profile, or you can offer various kinds of bundles that could attract a vast consumer base.
The fact that bundling does not require a physical effort for online retailers makes it super easy to offer various bundles.
Now, suppose you bundled a PC with a smartphone. Both are under the category of consumer electronics, but are they actually related? If the customer didn’t come to your store to buy both, which is a very low possibility, she might perceive your bundle as an aggressive marketing strategy rather than a favorable offer that she can benefit from.
A quick overview
Product bundling is a marketing strategy worth to add to your marketing mix. Retailers bundle several products, often related. The bundling strategy has several significant advantages:
- It helps you get rid of the slow-moving stock
- Attracts customer attention to low-demand products
- It increases the basket size
- It saves the time that would go to searching products
Pricing software improves your bundling strategy in two ways:
First, it gives you competitor price knowledge with which you can adjust prices and offer the best deals.
Second, it allows you to set smart pricing rules to make sure your costs are covered.
By taking competitor price knowledge and your costs into account, you can offer the best deals without experiencing loss.
The most important trick to offer attractive bundles is to determine your target market. The purchasing behavior of your repeat customers can give you useful clues to figure out what to offer them in bundles. Furthermore, your product bundles must make sense to your consumers. If not, they can perceive your offer as an aggressive marketing strategy.