Strategies to Bundle Products

Strategies to Bundle Products

"Would you like fries and a drink with that?"

Our society is fairly dominated by bundles now.  Why?  Because they work!  Bundling products allows you to extract more revenue out of your customers.  The question is how do you determine what products to put in which bundles?  There isn't an easy answer to this, but I will try to explain a few guidelines that I've used over the years in this regard.

The first thing you should do is try to figure out the perceived and absolute value of each product/feature.  You can read more about value in my other posts, but "perceived value" is what your customers think it is worth and "absolute value" is what it actually is worth (or at least what YOU believe it to be worth).  Once you have worked that out, you could have any of the below situations, which might steer you one way or another.  I'm just going to address High and Low values to keep this simple.

High Perceived / High Absolute - Depending on how many products you have to choose from as lead products for a bundle, this would be good as a bundle lead or leaving out of a bundle as just a standalone product.  It is likely better to do this as a standalone product unless you need a lead product for a bundle.  This is because it can stand on it's own two feet well and customers should pay for it (if priced fairly!).

High Perceived / Low Absolute - This is usually the perfect lead product for a bundle.  Your customers value the product, but it doesn't actually do a whole lot.  It is best to mix this with other products in the bundle that contribute to the same metric, to keep things grey as to what products are contributing what value.  If the value isn't trackable, even better!

Low Perceived / High Absolute - Before you think about bundling a product/feature with this combination, you should investigate further.  Usually when this happens, the absolute value is actually unrealistic and needs to come down, but it may just be that some extra marketing/training needs to be done to increase the perceived value.  If you can move this to High Perceived / High Absolute, it changes things a lot.  If you can't, then consider combining this with a High Perceived / Low Absolute to balance the bundle performance out, especially if the value delivered is measurable.

Low Perceived / Low Absolute - This is what I usually refer to as "fluff".  These generally always go inside of bundles as they are not strong enough to stand on their own two feet, unless really inexpensive.  These products are the ones that can sometimes push someone over the edge of choosing a better package.  Think of channel packages for TV.  There are usually plenty of channels that you know you probably will never watch, but you MIGHT watch them, so you still attach a bit of value to that.  Those are Low Perceived / Low Absolute products.

I hope that gives you a general understanding of how to put bundles together effectively.  Obviously there is a lot more to it, but this is a good starting point.  As with any pricing changes, if you have the opportunity to test, do it.  That can be a live test, or something offline like a conjoint analysis.