Does bundling products together in your offer result in higher sales? Bundling can be an effective way to sell, but research suggests it can backfire if you don’t approach thoughtfully.
Product bundling, good/better/best choices, add-ons and free bonuses have been a part of direct marketing offers for generations. Any smart direct marketer will test offers in small volumes first before rolling out the best performing test in larger circulation.
But product bundling can have its own set of purchase and perception challenges. Research from authors at Pepperdine University and Northwestern University suggests that consumers are not always willing to pay as much for a combination of items as they would for, say, two separate items. In this study, primarily for retailers but with application to direct marketers, reveals:
- Consumers think in categorical terms. When an item considered expensive is combined with an inexpensive item in a bundle, consumers perceive the combination to be “moderately expensive.” Consumers forget they are purchasing multiple items and the bundle can result in a perception that they should pay less for the combination.
- Sales declined 15 percent when an inexpensive item was added to the expensive item.
- Consumers perceived that the combination of an expensive item and inexpensive item should result in a price decrease of 25 percent.
In direct marketing, our sales environment is different than retail. Fortunately, as direct marketers, we can test in a controlled environment. And we can be confident in the outcome of the test by applying sound statistical confidence intervals when evaluating the results. If you offer multiple products, here are a few bundling recommendations for testing. They can be done as A/B, A/B/C, or any combination of these five options:
- Bundle products together for one price.
- Charge full price for the expensive item, and give the less expensive item away as a free premium.
- Charge full price for the expensive item and price the second item at a deep discount.
- Create a “Good/Better/Best” offer, which makes it look less like a bundle and gives your customer choices.
- Position additional items as add-ons that enhance the primary product you offer.
Your offer is often considered to be a substantial contributor to the success of any direct marketing campaign. With multiple items, bundle thoughtfully and use your imagination to position your offer.
(This column first appeared in Today @ Target Marketing Magazine).