Is product bundling right for your business?

From video games to fast-food restaurants, product bundling has become one of the most widely used pricing strategies. And it’s not hard to see why – soaring sales and plummeting costs are two potential effects of increased product bundling. But could a product bundling strategy work for your business?

We’ve put together a brief guide to the benefits of bundling different products together, helping you to understand whether it’s a good fit for your company. First off, what is product bundling?

Product-service bundle definition

Essentially, product bundling is a pricing strategy wherein you group individual products before selling them as a single unit. Sometimes referred to as a “multipack” or “package deal,” a product bundling marketing strategy is used to encourage your customers to make more purchases. You’re probably already familiar with a range of product-service bundle examples. A classic example that everyone can relate to; McDonald’s Happy Meals, one of the most prominent examples of a product bundling strategy.

What are the benefits of product bundling?

There are lots of advantages associated with product bundling strategies. For a start, it’s a great way to increase the average value of your orders. Instead of buying a single item, your customers may be tempted to spend a little more to purchase multiple things at once, boosting the amount you’re bringing in without raising your transaction costs. It’s also important to note that product bundling is also a win for the customer, giving them a discount on items that tend to be purchased together anyway.

Also, product bundling can decrease your business’s costs. When it comes to marketing, for example, there’s no need to market each product individually. Group complementary products and market them as a single unit instead. Distribution is another area where product bundling can produce savings, giving you the ability to store, package, and ship your items together, thereby reducing costs and maximising efficiency.

Moreover, product bundling can be an effective way to reduce inventory wastage. Dead stock takes up space in your warehouse and eats into your holding costs. Eventually, it’s written off and discarded as waste. By taking that stock and bundling it together with faster-selling products, you may be able to clear out difficult-to-move stock before it becomes necessary to bite the bullet and write off the cost.

Exploring the best product-service bundle examples

As we mentioned earlier, product bundling is already widely used in restaurants, with “combo meals.” However, there are lots of other industries where product bundling marketing strategies are commonplace. Take home entertainment systems, for example. Rather than purchasing speakers, soundbars, subwoofers, and video screens separately, manufacturers tend to bundle them together at a single price-point. Other product-service bundle examples include clothing outfits (i.e., suits sold as one unit) and toiletry bundles (i.e., kits containing shampoo, conditioner, and shower gel).

Product bundling for SaaS companies

Besides traditional retail or e-commerce business models, product bundling strategies can be particularly useful for companies in the SaaS space. Providing your company with multiple sales from a customer who may otherwise have only made a single purchase, product bundling is a terrific way to reduce your customer acquisition cost (CAC) and drive overall revenue. Furthermore, product bundling is especially effective for digital products, given their low marginal costs.

Can a product bundling strategy work for you?

So, could a product bundling strategy work for your firm? Most of the time, yes. Product bundling works for a broad range of products, although it’s particularly impactful if one piece of the bundle has a very low cost. While there are certain caveats to consider, bundling favours the seller in the vast majority of cases. To succeed with product bundling, try to group products with a positive synergy and focus your marketing efforts on the total value provided by your bundle.

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