Do not “bundle” your products
Everywhere you look online these days you can see “product bundles”. Whether it is on a major site like Amazon, or a cheap and tacky “internet marketing” site, you can find millions of examples of buying one item in combination with another. The theory goes that this “up-selling” increases perceived value in the minds of the customer and also raises additional revenue for the seller. But that theory is simple hogwash it seems.
Research actually shows what happens when you bundle products is that you DECREASE perceive value. People think the products you are selling are worth less. Indeed, it seems that people will pay more for the items separately than they will when they are bundled together.
As an example, imagine you are buying a new CD player priced at £150. The retailer “bundles” that with some headphones, priced individually at £35, making the total price of the two products £185. But you get the bundled deal for, say, £170 – saving you £15. Seems like a nice deal. Not so.
What happens is people tend to believe that the CD player is overpriced, so they value it LESS. If you do not bundle them together people are more prepared to pay the two separate prices. In other words, without the bundle deal in place the retailer earns £15 more.
So why are bundled deals so popular? Because retailers are focusing on the wrong thing. Clearly, by selling bundles it helps cash flow. It might get a sale where otherwise you might not get one, from those bargain hunters. In other words, the retailer is focused on sales, their own income. Seems fair enough.
But the side-effect of this focus is that consumers then devalue your products and services and you end up being pushed downwards towards commodity pricing – precisely where you do not want to be as a retailer.
When retailers do not bundle products they are much more focused on the thinking of the consumer – by providing them with items they value highly. In other words, bundles demonstrate you are actually self-focused, whereas lack of them shows you are customer focused. The research shows that when you do not offer a bundled item you INCREASE sales by around 15%. People do not like to think they are getting “cheap” stuff – they want value. Bundling products together implies cheapness, it seems, not value.
Like so many things in the world of online selling a popular activity takes place because of a theory which people think is logical, but for which they have no real evidence to support the notion. When you do get the actual evidence, it often points to something different. So if you want to increase your online sales, stop bundling products together.
Related articles
- The Art of Product Bundling for Higher Profit (outright.com)
- How to increase sales by displaying prices properly (grahamjones.co.uk)
- How stupid can you be as a retailer? (grahamjones.co.uk)
17th March 2012 @ 4:06 pm
Very interesting. I do have periodic ‘specials’ that either offer a reduced price per item or a ‘bundle’ sale. And, I do sell more that way. I might try testing this strategy.
18th March 2012 @ 6:28 am
Thanks for the comment Karen and I’m glad to hear your specials lead to more sales. But what the research is really pointing out is what that does to the perception of the value you provide. It appears to push people towards thinking of a business more at the commodity end of the marketplace. As you say, the only real answer to these things is to test the strategy – what works in one area may well be different in another.