Bundling is a selling strategy implying a suggestion to buy several products or render a few services as one compound unit, often at a discount. Product bundling is the most common in software business (e.g. Word, Excel, Access, Power Point and Outlook in the MS office suite), cable television industry (many channels united in a package at one price) and fast food industry (a few items combined in a complete meal). However, product bundling is applicable to other industries such as software and computer services, automobiles, vacation packages, fast food restaurants, utilities, telecommunication, magazine publishing and many others. Bundling can be referred to as a package deal, an anthology or a compilation.
There are numerous approaches of bundling products. The most common are: by product category, by customer or by application:
- by category: a distributor forms bundles based on secondary products — if a customer needs one item, they will potentially need related products as well;
- by customer: whenever a distributor asks their customer if they need anything else, the question leaves the customer puzzled. So by being aware of the business well enough to make sensible offers, distributors help customers realize their needs.
- by application: onsite seminars are effective activities for promoting and selling product bundles for B2C as most companies can afford training for their staff and readily send over their employees to such events.
Products can be bundled in different combinations:
- Pure bundling – when a buyer can only acquire the entire bundle or nothing. It can be split into two categories such as joint bundling where the two products are promoted together at a single bundled price, and leader bundling with a leader product offered for discount if acquired together with a non-leader product. (‘Happy meal’ by McDonald’s, Microsoft Windows + Media Player, TV series DVD’s (sold by seasons, each season contains many episodes))
- Mixed bundling – when a buyer selects between obtaining the whole bundle or a single part of the bundle. Mixed-leader bundling is a version of leader bundling with an additional possibility of purchasing the leader product separately (restaurant menus, equipment spares shops, accessories stores)
Product bundling allows creating a new product category, containing packages that customers set up for buying. These packages consist of already existing store items and may have their own package specific surcharges. Additionally, product bundles can have a separate inventory and price.
In online retailing bundling occurs for two essential reasons: the business needs to increase the average order amount and profits or the stock of goods requires to be sold as soon as possible.
Since bundling appeared as a strategy it has been researched for about forty years. It usually saves a consumer up to 15% over buying separate items. And even though this approach doesn’t always work, bundling has proved to be an efficient and lucrative marketing strategy, given the right circumstances.
If you feel that product bundling is something you need for your business, contact Holbi and we will study your business model and the product range you offer, to recommend the best approach of implementing bundling specifically for your store.