How to create a product bundle
Imagine: you are responsible for a successful return of HEMA to the Dutch retail chain landscape. To make this happen, you have two choices:
- The first option is to fully cater to the online consumer, focusing solely on offering HEMA items online, including through Bol.com.
- The store formula remains as it is, but you choose to enter into cooperation with a permanent partner to strengthen each other's business activities. The partner in this case is Jumbo Supermarkets.
Which of these two options creates more value?
Marcel Boekhoorn opted for the latter. Both parties saw an advantage in joining forces. Both had their reasons for doing so. In recent years, Jumbo has been focusing on enormous growth in its market share. Hema was looking for a way to get out of the red by creating new sales channels.
The cooperation between HEMA and Jumbo can be seen as bundling products. The customer comes into contact with more than one formula or product. A very powerful concept. Especially for on Bol.com. Before you start offering product bundling, it is useful to get some insight into what works and what does not work. After all, there is a lot to gain.
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What is a "product bundle"?
It's just how you look at the meaning of a bundle of products. Some people also consider a newspaper to be a bundle of products, just as a CD is, for example (so would a concert be?).
A product bundle is actually an upsell. An upsell is nothing more and less than an addition to what the customer is looking for beforehand. To make a good breakdown, the three items below are the most appropriate to count as a product bundle.
- Bundles: two or more items that complement each other. These are added from the product page or at checkout. Often sold at a discounted price. For example, a phone and phone case.
- Cross-sells: a combination of products that complement each other from another category. For example, a whiskey glass plus the whiskey itself. Both can be used separately.
- Add-ons: additional protection on your antivirus software, or an extended subscription at a discount.
All three of these are examples of a product bundle. Regardless of where you draw the line, there are two main groups that the above examples of product bundles fall under.
1. Product bundles and pricing.
Product bundles are often sold at a discount. This discount is just one example of a motivator to purchase the bundle. This is also immediately the most difficult one to make successful.
2. Pure product bundles vs. mixed product bundles.
- Pure bundles are only available as product bundles. An example is Adobe Photoshop: you always get all filters included in the
package, even if you don't want some filters. - Mixed product bundles can be bought both separately and together. Think of McDonalds. You can buy a burger separately or in a menu.
For you as a seller on Bol.com, the combinations are now clear. From here we look at the, sometimes surprising, possibilities.
How product bundles can bring you profits
Usually, product bundles are a huge opportunity to increase your average order value. McKinsey (a research firm in America) has estimated that 35% of average order value is determined by product suggestions by Amazon's algorithm (something that some consider a product bundle). You can debate which upsell bucket the recommendations belong in: adding products to a pending purchase is a very good way to grow sales. Bol.com, of course, knows this better than anyone else. Of course, there are a number of other ways to significantly increase your sales that you can influence a bit more yourself.
1. Price transparency. A classic example: an expensive hotel charges 750 euros per night. When, as a customer, you also have to pay 10 euros per bottle of water, you probably feel cheated. The opposite is also true, when it gets water for free, it's another good deal.
High-end services and high-end products are best bundled with a product that has less value. This prevents unnecessary friction and obviousness to the customer.
2. Reduce inventory. Product bundles help reduce the amount of loose inventory. However, there are some risks involved in just combining everything, for example, an expensive product with a cheap product. We will come back to this later.
3. Sheer simplicity. When you sell 24 items separately, you obviously have more work to do than when you combine everything.
4. Increase product usage (software). Spotify and Netflix are smart about this. Netflix, for example, has the option to permanently exclude horror movies from a subscription, which means you pay two euros less per month.
How exactly do customers determine what something is worth?
According to Roger Dooley (author), it reduces the "pain" a customer feels when he or she proceeds to make a purchase decision. The price of a product is generally quite opaque. You usually don't know how a price was arrived at. Therefore, it is difficult for a customer to determine what the right price is for something. It may seem rather unethical, but the more opaque a price is, the less afraid a customer is of making a wrong choice. They simply have less to choose and compare.
An example is a customer who goes for the "luxury" model of a car, having no idea how much more he is actually going to pay based on leather seats versus the premium model of the sound system. This prevents too salesman from categorizing each feature into fair or unfair. And yes, this ultimately benefits the customer as well.
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Automotive products have long bundled all the functions of a car into a small amount of product bundles. In doing so, they avoid a customer's pain. Going through each feature step by step would only end up creating a tremendous amount of selection stress.
The pain the customer experiences when buying is hugely important to reduce. There are numerous studies, which show that customers first look around online
before making a purchase in a store in town, for example. They do this for a good reason. Namely, to find out what is a fair price?
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When bundling doesn't work
Now that you know how a customer looks at a product (and how they rate it), it's time to look at how not to do it with the above in mind. Below are two types of challenges.
The salesman's dilemma
In a study of the salesman's dilemma, it looked at a salesman who was trying to sell an iPod Touch. For this, he had two offers:
- The iPod Touch with a case;
- An iPod Touch with a case and a free downloadable song.
The idea behind these two choices is that option two should make the purchase more valuable
for the customer. That's what 92% of providers thought. This
is unfortunately incorrect. The study shows that test subjects were willing to
pay more for the iPod without a free downloadable song.
Why?
Because we as humans unconsciously look at the average of the two
individual products in a bundle, rather than adding the value together
. This significantly reduces the value of option one in the eyes of the customer
. So ask yourself in what way you want to bundle your products
on Bol.com.
Category classification
Category classification is a way of customers to create a clear picture for themselves so that the customer knows what kind of product it is.
Alexander Chernev briefly explains exactly what it means below:
"People generally tend to categorize products as expensive or as cheap, based on this they form an image about a product. When a product is seen as expensive and then bundled with products seen as cheap, the combo is seen as less valuable."
So make sure when you offer a product bundle, you don't just offer two different items both with different value levels. That would be a great waste of your offer on Bol.com.
Making product bundles work for you
There are two ways to combat categorizing your products and the seller's dilemma. You do so by focusing on value and by influencing categorization. And as always: think logically! Always do product research as well.
Seller's dilemma: focus on the value of the more expensive item
Of course, you can't always combine two expensive items. Or rather, make sure that this is how every customer experiences it. Sometimes you can't avoid combining two products, one of which seems less valuable. For example, when it is a logical combination. Customers simply combine the two separate values and average them out.
This seller only talks about the value of the first item and does not mention that it comes with free glasses in the description. This makes customers less likely to weigh the average of the items against each other.
Category Classification: Focus on Benefits.
To keep your customers from thinking in categories such as expensive and cheap, it's important to look at the benefits of your product. This will shift your customer's attention to exactly where you want it to be.
The article above incrementally names all the advantages of both products
together. This makes it more difficult for the customer to actually
designate one as cheap. Of course, this only works when the gap is not
huge, like the example of the comb hair removal device.
Also, for yourself, just think logically about what complement goes with your product
. Some items actually reinforce each other very strongly. A leash for
a dog + dog poop bags. Logical right?
Conclusion
Product bundling is not as easy as it seems. You are dealing
with and customer who looks at your product ad
in a certain way. For example, the customer will naturally try to grab the average value of
your bundle, or classify the two (or more) products as cheap or expensive.
It's up to you to avoid this by focusing on the most expensive item
or naming the benefits of the items together.
