BUNDLE PRICING
Definition
Bundle pricing involves selling multiple products or services as a package at a total price lower than the sum of their individual prices. It is a powerful tool for increasing the average order value, moving slow-moving items, and enhancing perceived value.
There are two types of bundles: pure bundles (available only as sets) and mixed bundles (products also sold individually).
Why It's Important to Know
- Increasing the average order value: A bundle encourages customers to buy more than they planned by highlighting the savings they’ll enjoy.
- Selling off slow-moving inventory: Including a slow-moving product in a bundle allows you to maximize its value without having to lower its unit price.
- Building loyalty: A well-designed bundle delivers a comprehensive experience that fosters greater loyalty than a standalone product.
Example
A beauty brand offers a serum for €39, a cream for €29, and an eye cream for €19. Sold separately, the total is €87.
As a bundle, the pack is offered at €69, representing a 21% discount off the list price. This offer results in an average order value 1.8 times higher than a single-item purchase and sells three items instead of one, with a higher overall contribution margin despite the discount.
How do you measure/use it?
Creating an effective bundle involves four steps: selecting complementary products (that are used together), setting the discount (typically between 10 and 25 percent), validating the overall contribution margin, and testing its appeal.
Pricing tools help identify product combinations that are naturally purchased together (shopping cart analysis) and simulate the profitability of a bundle before launch. The visual presentation of the bundle (savings shown, strikethrough price on the total) is just as important as the pricing itself.
Mistakes to Avoid
- Bundling non-complementary products: customers don't see the value in it, and the bundle doesn't take off.
- Cannibalizing individual sales: if the bundle is too attractive, it replaces higher-margin individual sales.
- Neglecting visual appeal: a bundle without a crossed-out reference price or proper presentation won't catch anyone's attention.
Frequently Asked Questions
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