How to Bundle Your Way to More Sales

At its core, e-commerce is no different than any other type of business. Yes the presentation may differ, but key marketing principles, like brand positioning still apply. In fact, one could argue that on the web, since we cannot touch, taste, or feel the product, branding and positioning are even more important, and crafting a proper offering requires a very deliberate decision making process.

There are the obvious points you’ll need to consider, such as product titles, product descriptions, pricing, and photography, but that’s just the tip of the iceberg. It’s obvious that you will place your products somewhere on a website, but what if you, like most other e-commerce retailers, happen to offer a variety of products that may or may not be related to each other?

If the goal is to increase revenue, then it goes without saying that your business will fare better when selling product bundles, perhaps via up-selling or cross-selling, than it would selling just a single product on its own.

Bundling itself is neither a novel nor complicated concept. Each day, we interact with a variety of industries that use bundling. Some brick and mortar examples include fast-food (value meals), telecommunications (internet+phone+cable), and insurance (home+automobile).

On the web, companies like Humble Bundle have built an entire business around the bundling model, packaging indie games and music together in massive fire sales that have produced millions in revenue for Humble, indie game studios, and the charities they have partnered with.

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On the web, companies like Humble Bundle have built an entire business around the bundling model.

Even Amazon, now a seller of almost everything, has had great success bundling additional services like video, music, and cloud storage with their Amazon Prime product, while their Subscribe and Save auto-ship program rewards consumers with massive discounts for bundling products into the same order.

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But just because it works well for Amazon doesn’t mean that it will work well for you. As with any marketing tool, product can be hit or miss, and even when it works is not something that should be implemented carelessly.

When it works, it pays dividends in the form of increased cost efficiency, higher ticket averages, increased customer lifetime value, and more competitive pricing that appeals to consumers. When implemented poorly, you risk decreased perceived value in the eyes of your consumers, and perhaps diminished brand value as a result of customers having a negative shopping experience.

The Science of Bundling E-Commerce Products

If you’re looking for hard numbers, the science of product bundling may first appear to give mixed signals. Some research concludes that not offering bundled items could increase sales by 15 percent. However, this figure was obtained from looking at bundles involving extreme price disparities, such as a $200 piece of luggage paired with a $5 ID tag.

When offered as a mixed bundle, sales skyrocketed. When offered as a pure bundle, revenues tanked by 20 percent.

The conclusion of this research was that, since consumers tend to think in categorical terms, the bundling of perceived “expensive” and “inexpensive” items can change the buyer’s perceptions of  each item’s value. What this means for your e-commerce business is that you should probably price items separately that are not of similar value.

More recent research has supported what marketers have been saying for decades: product bundling increases sales! After studying the handheld video game market between 2001 and 2005, Harvard Business School professor Vineet Kumar found total hardware sales were higher by approximately 100,000 units when bundles were offered.

The key was in how they were offered. When offered as a “mixed bundle,” (when the bundled products were also sold as individual units) sales skyrocketed. When offered as a “pure bundle,” (the group of products were not available for purchase separately) revenues tanked by 20 percent in comparison to the mixed solution. With this in mind, give your e-commerce customers the flexibility of choice.

Tip: Use IgnitionDeck Commerce's Credits functionality to give your customers the ability to make their own product bundles
Tip: Use IgnitionDeck Commerce‘s Credits functionality to give your customers the ability to make their own product bundles

As a vender of digital goods, you already have some potential advantages over other businesses. Once you’ve created your product, it’s done! Unlike physical product-based businesses, you don’t have to worry about managing ongoing material, manufacturing, and shipping costs, so you have more flexibility to try new things.

Taking all this into account, here are some take-aways:

  • Offer your products as bundles, as well as individually
  • Ensure your bundles result in at least a 5% savings
  • Be aware that pre-assembled product bundles that include both expensive and inexpensive products can lead to customers feeling like your more expensive products are over-priced
  • Consider allowing customers to create their own bundles for a discount. For instance, buy any three 99-cent songs for $2.49.

Keep these tips in mind during your next product brainstorming session and you’re sure to come up with some innovative offerings. Stay tuned for more exciting news and e-commerce tips from Ignitiondeck.

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