You were looking for a new laptop, a basic one, not too expensive and nothing fancy. And yet you find yourself leaving the store with a wicked gaming PC with all the bells and whistles. First of all, the seller convinced you to upgrade to a bigger laptop with more power. And by doing so, the sales person gave you a good deal on the extra equipment. He also offered you a set of state-of-the-art speakers and a leather sleeve for the laptop. And you got it all for half the “market price”. In addition, you signed a relatively cheap insurance that covers all possible accidents that could happen to your new, expensive laptop.
How did this happen? Well, you’ve been seduced by one of the oldest tricks in the book: product bundling.
Promoting multiple products as a single package is a useful tactic for retailers, and it can manifest in different ways. The “value meal” is a great example of cross-selling, which is when you push related but independent items to customers. Up-selling is a similar tactic that urges patrons to opt for something bigger and better. Kitting, meanwhile, is true-blue bundling, wherein the customer truly needs all the separate parts to use any of them.
Product bundling is a technique that all retailers can learn from when it comes to vending their own items. So, let's get into the details and explore how it can help you land more sales.
Cross-selling is a method of encouraging the customer to supplement his or her initial purchase with products that supplement it. For example, a stereo might function on its own, but it will sound even better when coupled with a nice new set of speakers.
Amazon is a paragon of boosting sales via cross-selling. The company has attributed up to 35% of its revenue to cross-selling, thanks to its “Customers Who Bought This Item Also Bought” and “Frequently Bought Together” tools, which automatically aggregate and display items that might be of interest.
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Up-selling, meanwhile, is the process of convincing a consumer to upgrade, settling on a more expensive model within the same product family. This might be a matter of simply augmenting the original model with extra features (like a deluxe sound system on a new car) or it could be an entirely different model of the same basic product (a more expensive car altogether). To return to the cross-selling example, a basic stereo might be suitable for some listeners – but true audiophiles will likely want a higher-quality model.
The power of up-selling is not to be underestimated. Research indicates that up-selling drives over 4% of total online sales (compared with 0.2% of sales driven by cross-selling tactics). That said, it does require a finer touch. Some people swear by the 60-percent rule as a guideline: Consumers are willing to upgrade by up to 60 percent of the original value. Any more than that and you risk failing.
Kitting is the technique of selling complementary items—that is, pieces that would not function on their own. For example, a new Mac computer is step one, but you also need a monitor to be able to use it. Selling dependent products as kits can streamline things for both the customer and the business by ensuring that the components are compatible and that they will arrive together, reducing returns and shipping costs, respectively. (Note that kitting will affect how you work with those products in your Product Information Management, or PIM, system.)
In conclusion, there are a few things to remember if you're considering product bundling as a way to increase revenue. Bundling is especially effective when at least one item is cheap to produce (for example, pushing a low-cost outlet converter along with a phone-charging cable). When set up alongside the individual products – which is a crucial step that highlights the savings for the customer – bundles tend to earn more overall sales.
Research has shown that so-called pure bundling, however, when the bundle is the only option (you aren't able to purchase the items individually), can actually affect sales negatively. So be sure to make it clear to customers how much they're saving when purchasing a product bundle. It's a win-win situation!
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