Product Bundling: 7 Simple Tactics to Skyrocket Your Average Order Value
Product bundling is an excellent way to boost your sales, power up your revenue and deliver a more rounded experience for customers.
Seriously, research from Forrester shows that cross-selling and upselling can increase revenues by up to 30%.
And one of the best ways to cross-sell and upsell? Yup, you guessed it: bundling.
But creating irresistible product bundles isn't exactly a walk in the park, especially if you're just getting started.
Thankfully, there's a couple of proven bundling tactics that work like a charm no matter what you're selling.
In this post, we'll cover:
So, if you're ready to implement product bundling in your store, let's keep going!
What is Product Bundling?
First things first, let's give a product bundling definition, so we're all on the same page.
In a nutshell, product bundling is a sales technique in which you group several products to sell them as a single unit for one price.
It's a strategy used to encourage customers to buy more products and ultimately spend more money.
But product bundles are also a win for customers. Instead of manually researching each product individually, bundles remove friction from the customer's purchasing decision.
For example, consider the last time you went to McDonald's. Think about how much easier it was to order a 'Big Mac Meal' (if that's your go-to) instead of choosing between different burgers, then choosing between different types of fries, and finally choosing between different drinks.
So, with the BigMac Meal, McDonald's has done the heavy lifting for you. You don't need to choose anything. Obviously, it means they'll earn extra revenue too. If you had to really consider if you wanted fries, you might actually opt-out of them.
Plus, the critical thing with McDonald's 'bundles' is that each product enhances the others' offering. Crispy fries and a cool drink go well with a burger, right? It makes the overall experience more enjoyable.
We'll talk more about the best practices and tactics for product bundling later, but now let's delve into how product bundling can help your business.
What Are the Benefits of Product Bundling?
It goes without saying that the biggest benefit of product bundling is a beefier average order value. But just how much revenue can bundles add?
Well, one analysis from McKinsey reported that up to 35% of all Amazon purchases come from product recommendations like these:
What's more, research from Forrester suggested that this type of bundle recommendation has a success rate of around 50-60%!
So the evidence is clear: offering related products to your customer's pending purchase is an excellent way to power up your revenue.
But along with a more impressive average order value, product bundling also offers you four more enticing benefits as a merchant.
- Move slow-moving products: Adding stagnant stock to a bundle can help shift it from your inventory.
- Pricing opacity: Adding a carbon fiber gear stick to your new car for $3,000 extra might seem like a rip-off. But a $45,000 car that comes complete with extras for $48,000 doesn't seem so bad, right? Bundle pricing removes the negative impact of lower-priced add-ons.
- Simplified marketing: Marketing a catalog of 10 related but distinct products is more complex than marketing just one product bundle.
- A greater product line: Selling low-priced items usually means you'll have to cover the cost of shipping and eat your margins. Alternatively, the buyer can pay the shipping and feel miffed at spending more on shipping than their order. Bundling products at a value threshold means you can sell lower-priced items at a price that makes sense.
The Two Biggest Product Bundling Mistakes to Avoid
Ok, before we jump into the specific product bundling strategies, let's talk about the two things you understand to avoid mucking up your bundling efforts.
1. The Presenter's Paradox
Consider the following scenario: suppose you have two friends who both enjoy whiskey.
So, on their birthday, you give them a $300 bottle of whiskey each. Except, to one friend, you also give some super-cheap plastic cups to drink the whiskey from.
Which friend do you think will value the present more?
The answer is the one who didn't get the plastic cups. This is because of a psychological quirk known as the presenter's paradox. It's a tendency we have to judge the average value of a bundle of products instead of its sum.
But it's not limited to gifting. In retail, research from The Harvard Business Review found that consumers will pay more for a single expensive item, such as a watch, than they will for a combination of that item and a cheaper one, such as a pen.
Fascinating stuff, right? But what implications does this have for your eCommerce bundling strategy?
Well, it's simple: don't lump products perceived as cheaper in with more expensive items. Doing so will lower the perceived value of the more expensive items in your bundle.
Instead, only bundle together items that are perceived to be of equal value. Now, that doesn't mean the need to be comparable in price.
But if your customers think that one item is 'expensive' and the other is 'inexpensive,' you'll reduce the attractiveness of your bundle as a whole, even though it's objectively more valuable.
2. Adding Unnecessary Cognitive Load
Cognitive load is the amount of mental energy required to complete a specific task. The more cognitive load you add to your shopper's experience, the less likely they are to convert.
Bundles that require shoppers to make too many decisions or choose between too many options are doomed to failure. Remember, one of the biggest draws of product bundles is that buying them reduces the cognitive load needed to purchase each item individually.
Often merchants may think that more choice is something that customers want. But in reality, that's not always true.
For example, suppose you're selling an electric guitar starter kit. If you're making rookie guitarists choose between different types of strings, amps, and plectrums, you're introducing a lot of friction into the buying process.
Instead, it's better to decide for them and use your knowledge to build an appropriate set-up for a first-time guitar player. The key here is to find that bundling sweet spot that delivers the most value to both the customer and you as the retailer.
Product Bundling Examples & Tactics to Try
Ok, with that out of the way, let's look at some specific product bundling strategies and how you can implement them in your store.
1. Pure Bundling
First up, we have pure product bundling. Pure product bundling refers to when you create bundles containing items that shoppers can't purchase individually.
Netflix is an excellent example of a company using this strategy. You can't pick and choose the series or films you want to watch. Instead, they put the entire media collection into one package you can access for a monthly fee.
So, while you might only want to sign-up to watch one specific series, you also place value on the vast amount of other content Netflix has to offer.
In physical product-based eCommerce, this strategy is particularly effective if you're looking to offload slow-moving stock.
For example, by grouping a slow-moving item with a more popular item, you can get them flying out of your warehouse while also giving customers a more enticing offer.
2. Price Based Product Bundling
Price-based product bundling involves grouping items into a bundle where the pierce is lower than the sum of its parts.
You've seen this principle in action In McDonald's, where it is better value to buy a meal rather than purchase each item individually.
But it's not just for fast-food restaurants. Check out how bidet brand Tushy allows customers to buy the Tushy Classic 3.0 and the Tushy Ottoman Relaxed for $149. Purchased separately, these products would cost $188.
GoPro offers a similar bundle discount in which customers can save $150 if they opt to get a memory card, spare battery, grip, and more along with their action camera.
This approach to product bundling entices customers to spend more than they otherwise would have because it feels like they're saving money.
Do remember, though, not to throw products with a lower perceived value in with your top products - this will lower the perceived value of your overall offer!
3. Gift Bundling
If you've ever had to buy a gift for someone, you know it can be hard to choose something they'll love, especially if there are many options. Each additional choice creates an opportunity cost that can leave you in a state of paralysis by analysis.
That's where gift bundles come in. Curated gift bundles can help you release the pressure to buy the right thing while also introducing customers to a broader selection of your product range.
Here's how Naturebox does it with their scrummy 'care package' gift box:
Another clever approach to gift bundling is to create bundles for specific occasions - this can be for birthdays, pandemics, Christmas time for Black Friday, or any other occasion. Creating occasion-based bundles makes it simple for buyers to select the right gift.
What's important to note with NatureBox's bundle is that, unlike Tushy, they're not emphasizing the price savings of buying their bundle. That's because they understand their buyers aren't necessarily price sensitive - instead, they want to give the best gift to show their friends and family how much they care.
When building your product bundles, don't always assume that your customers are tightly focused on price. Often highlighting the convenience or synergistic nature of the products is enough to get customer's buying.
4. Mixed Bundling
If you're selling several low-margin items, it can make sense to group them into a mixed product bundle.
Take Native Cosmetics, for example - they sell low-priced deodorants, body washes, and soaps. Instead of having customers pay $7 for a product that costs $5 to ship, they group several related products into sets that retail for $30.
The beauty here is the shipping and handling costs are probably the same, which means they're able to cream much more profit from each sale. Plus, what's more, customers also get greater exposure to their entire product line.
This is a similar tactic used by Harry's Razors, too - their Truman set offers shoppers the complete Harry's shaving experience for just £14.
On top of creating bundles as products, Native also uses cart drawer upsells to encourage shoppers to add even more products to their bundle. In an interview with the founder Moz Ali, he explained how adding this mini-deodorant upsell offset most orders' shipping and handling costs.
Think about ways to cross-sell and upsell your customers before and after checkout to increase your average order value.
5. Category Based Product Bundling
Grouping products by category and offering a discount when a customer buys more than one item is a great way to boost average order value.
This approach is based on the price-based bundling strategy. However, grouping items by category introduces a 'build your own bundle' element, which can be very successful. Here's how 3 Wise Men does it:
When implementing this bundling strategy, it's important not to introduce too much choice into the equation. Remember, bombarding customers with too many options increases the cognitive load and boosts the odds that they may bounce.
6. Incentive-Based Product Bundling
Customers don't only care about cash savings when it comes to bundling. In fact, offering non-cash incentives such as a free shipping threshold is a super powerful way to drive up your AOV.
For example, I was going to pick up a pair of jeans from Banana Republic. However, my cart value fell just short of the free shipping threshold.
Rather than spend $15 on shipping, I added a $25 tee to the cart and qualified for free shipping.
I'm getting a better deal in this bundling scenario because I've just effectively paid $10 extra for a t-shirt, and Banana Republic is also getting revenue from me.
Think about implementing non-price-based incentives that can motivate your customer to bundle up and save more.
7. Post-Purchase Product Bundling
If a customer buys a single product, you still have a chance to upsell them into a bundle after checkout.
Post-purchase upsells and cross-sells are super effective because customers have already committed to buying from you.
To see this strategy in action, you need look no further than Amazon's familiar thank you page that most of us see at least once a month:
Amazon leverages powerful algorithms to display product recommendations on its thank you page. (Psst...you can do the same thing on Shopify with ReConvert & Wiser!).
These personalized suggestions, along with the psychological principle of consistency, make this a mean way to increase average order value and send your profits through the roof.
Tips for Successful Product Bundling:
Now that we've covered some examples of successful bundling, let's talk about a few extra tips you can use to increase your store's AOV.
a) Use the Checkout or Post-Purchase to Bundle Complementary Products with Low-Risk
One downside of cross-sell bundling is that it can cause potential customers to think twice before making their purchase, and quite possibly lead to many of them canceling their order altogether.
This is especially true for bundles that include high-ticket items.
One of the best ways to avoid the risk that comes with bundling it to use post-purchase bundling strategies like the ones we mentioned in the list.
Since customers have already purchases, it means the risk is practically gone.
b) Create Data-Driven Bundles to Increase Conversions
While it's viable to create bundles based on intuition alone, that's not a sustainable way to run your whole business.
Instead, use your store's data to pinpoint the best bundling strategies.
For instance, if you find that a large portion of your customers tend to buy two items individually, you may want to create a discounted bundle to encourage even more purchases.
c) Consider Product Bundling as a Method to Get Rid of Dead Stock
One great way to move dead stock is to offer it as a free or discounted addition in a bundle.
Pairing dead stock with your highest-selling items as part of an inventory clearance sale makes the offer more enticing for customers and helps you move products off the shelves.
Wrapping Up: Create Product Bundles to Help Customers Discover New Products
Product bundling offers a diverse range of benefits to you as a merchant. These benefits extend beyond simply more revenue and should provide you with a solid motivation to get your bundling strategy right.
When planning your bundling tactics, remember the presenter's paradox. Be wary of how pairing high-value items with low-value items may drag the overall perception of value south. Also, try to minimize the cognitive load you place on your customers - it shouldn't be hard for them to create a bundle.
Remember, even something as easy as implementing a free shipping threshold or adding post-purchase recommendations can be enough to encourage customers to bundle up and spend more.
On Shopify, you'll find plenty of tools available to help you create intelligent bundles that your customers simply can't resist.
Now over to you! Do you use product bundling in your store? What tips and tactics can you share to help other merchants out? Pop them in the comments section below!
Product Bundling FAQ:
What is the Product Bundling Process?
Product bundling is a sales technique that involves selling multiple items together (usually at a discounted price).
This technique allows customers to save money on items they would have bought separately and increase merchants' average order values in one swoop.
What are the Customer Benefits of Product Bundling?
The most common benefit from bundling is that customers can save money by buying in bulk, but that's not the only customer benefit.
Product bundling can also help introduce complementary products to customers who might not have found them in the first place.
Why is Bundling Necessary?
Product bundling helps to increase your average customer's lifetime value while decreasing marketing and distribution costs for each individual product involved.
It's a great way to increase margins without having to add a significant amount to your marketing budget.