Conversion rate
What is Product Bundling? Strategies, Tips & Examples
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Cathy Carpetta
November 2, 2023
Introduction
Product bundling is a sales strategy where two or more products are packaged together at a combined price, typically at a discount compared to buying each item separately. It is one of the most effective ways to increase average order value (AOV) and move inventory faster in e-commerce.
Amazon attributes up to 35% of its revenue to its "Frequently Bought Together" recommendations (McKinsey). Brands on Shopify and WooCommerce use bundling to lift AOV, clear slow-moving stock, boost conversion rates, and increase repeat purchases.
This guide covers the main bundling types, their pros and cons, and practical steps to build bundles that sell.
1. Top 7 strategies to maximise sales with product bundling
1.1 How product bundling works
Product bundling is a marketing strategy where two or more products or services are combined and sold together as a package.
Bundles are typically priced at a discount compared to buying each item separately, giving customers a reason to buy more. The strategy benefits both businesses (higher AOV, faster inventory turns) and consumers (better value, more convenience).
1.2 Differentiating bundle types for success
Pure bundles
Pure bundling involves offering products exclusively as bundled packages, meaning customers cannot purchase the items individually. This strategy encourages customers to buy the entire package, often at a discounted price.
New product bundles
When launching new products, businesses can create bundles that include these items, allowing customers to explore the latest offerings while enjoying a value-added deal.
Makeup brand Fenty Beauty, founded by Rihanna, often introduces new makeup or skincare and limited-edition products in bundles.
For example, the “Prime + Set Essentials Instant Mattifying Set” includes its primer and mattifying powder. This not only promotes new products but also incentivises customers to try multiple items at once.
Mixed bundles
Mixed bundling, also known as custom bundling, gives customers the choice to buy a bundle or individual items. You can encourage bundle purchases by offering them at a lower price than the combined cost of individual items.
This way, some customers get a discount on specific items, while others pay the full price for what they choose not to bundle. This approach provides flexibility and a sense of personalisation.
Unbottled, a solid-cosmetics brand, offers its three best-selling products in a bundle smartly called “Trio Bye Bye Plastic” that includes a shower soap, a shampoo and a face wash.
Research indicates that mixed bundling is particularly potent, while pure bundling has been found to decrease sales by more than 20% in comparison to mixed bundling.
Cross-sell bundles
Cross-sell bundling involves pairing products from different categories or brands, encouraging customers to explore a wider range of offerings.
One of the most successful examples of e-commerce bundles is Amazon’s “Frequently Bought Together” type of bundle that displays relevant additional items on the product page, based on what a customer is browsing. Amazon attributes up to 35% of its revenue to these types of deals, making cross-sell bundling one of the highest-impact strategies available.
Gifting bundles
Gifting bundles are designed with the intention of being given as gifts, often featuring corresponding items or themed assortments.
Skincare brand, Horace, created a “Skincare Gift Set” for the holiday season that includes their best-selling products, making them ideal gifts!
Inventory clearance bundles
When businesses need to clear out excess inventory, they can create bundles that include slow-moving or surplus items, providing customers with significant discounts.
Clothing retailer ASOS often offers clearance bundles of clothing, shoes, and accessories from past seasons. By bundling these items together at a reduced price, ASOS can clear out older inventory while offering customers a great deal.
Buy-One-Get-One bundles
Buy-one-get-one (BOGO) bundles involve offering a free or discounted product when a customer purchases another item, encouraging them to buy more.
As in the words of Dan Ariely, the author of Predictably Irrational, "Zero/free is a source of irrational excitement; it's called the 'zero price effect.'"
Explore these BOGO variations:
- Percentage discount: Customers receive a percentage off the second item when they buy the first at full price. For instance, enjoy 50% off the second item.
- Value reduction: For example, get $5 off the second product when you buy the first at the regular price. Common in clothing, beauty, and hardware.
- Buy X Get Y: Customers receive a free product when they purchase a specified number of items, like the classic "buy 2 get 1 free."
- Free samples: Brands offer complimentary samples when customers buy any product, particularly effective for introducing new product lines.
- Free gifts: It encourages purchases, receiving a free gift when buying a set of items is a common practice in cosmetics.
France's leader in Nutricosmetics, Lashilé Beauty, includes free gifts depending on the bundles you buy. For example, for three months, you can get a free pouch or for 6 months, you also get a free bamboo brush.
2. What are the advantages of product bundling?
Product bundling increases average order value by encouraging customers to purchase multiple items in a single transaction. Brands using mixed bundles, cross-sell bundles, and BOGO offers on platforms like Shopify and Amazon typically see higher conversion rates and faster inventory turnover.
Increase sales
Product bundling can significantly boost sales. The greater the number of products a customer purchases in a single transaction, the greater the average order value (AOV) they will have at the checkout. This can lead to substantial revenue growth.
Enhance customer value
Customers appreciate the convenience and value that bundled products offer. They can get everything they need in one go, saving time and effort. This enhances customer satisfaction and loyalty.
Competitive advantage
In a crowded marketplace, product bundling sets your business apart from the competition. It showcases your creativity and ability to cater to the diverse needs of your customers.
Inventory management
Bundling can help manage inventory more efficiently. It allows you to sell slow-moving products by pairing them with popular ones, reducing the risk of overstocking. Fulfillment platforms like Bigblue and ShipBob can track bundle components as separate SKUs, keeping stock levels accurate even when individual products appear in multiple bundles.
Cross-promotion
Cross-promotion is inherent in product bundling. When one product in a bundle gains popularity, it can boost the sales of other items included in the package.
3. What are the risks of product bundling?
Loss of individual sales
While bundling can increase overall sales, it may lead to a reduction in individual product sales. Some customers may only be interested in specific items.
Pricing challenges
Determining the right price for bundles can be tricky. Overpricing can deter customers, while underpricing may reduce profitability.
Complex inventory management
Managing inventory for bundled products can be more complex, as you need to ensure all components are available when needed.
Consumer confusion
If not done correctly, bundling can confuse customers, making it challenging for them to understand the actual value of the offer.
Customer resistance
Some customers may resist bundling, especially if they feel forced into buying items they don't need, which can result in negative customer experiences.
Reduced profit margins
Depending on how you price your bundles, profit margins on individual items may be lower than if sold separately.
4. Implementing effective product bundling
To maximise product bundling's potential and drive business growth, adopt a flexible and informed strategy.
4.1 Know your audience
Thorough market research is key to understanding your customers. Use your CRM data, surveys, and social media analytics for a complete view.
Actionable tips:
- Segment your audience based on demographics and buying behaviours.
- Study past sales data for purchasing patterns.
- Gather feedback through surveys and monitor social media for product discussions.
4.2 Choose related products
Successful bundling comes from combining products that complement each other, offering greater value together.
Actionable tips:
- Examine purchase history for commonly paired products.
- Use A/B testing to find resonating product combinations.
- Pair popular items with complementary accessories.
- Update bundles regularly based on customer preferences.
4.3 Pricing strategy
Ensure bundle pricing offers notable savings compared to buying separately, enhancing its appeal.
Actionable tips:
- Calculate bundled product prices and set a suitable discount.
- Provide tiered pricing options catering to various budgets.
- Apply psychological pricing, like ending with "99" or "95".
- Offer time-limited promotions to boost sales.
4.4 Marketing and promotion
Promote bundled products effectively, showcasing their unique value.
Actionable tips:
- Design dedicated bundle landing pages with quality images and descriptions.
- Use email marketing for tailored bundle promotions.
- Share customer testimonials and unboxing videos on social media.
- Partner with niche influencers to promote your bundles.
4.5 Monitor and adapt
Stay agile by continually assessing bundle performance and adjusting based on feedback and trends.
Actionable tips:
- Use KPIs to evaluate each bundle's success.
- Refine strategies with A/B testing.
- Take onboard customer feedback for improvement.
- Keep track of market trends and competitors.
Start bundling smarter
Product bundling works when you know your audience, pair complementary products, and price bundles to deliver clear value. Start with mixed or cross-sell bundles, measure AOV and conversion rates, and iterate based on what the data tells you.
The brands that treat bundling as a retention and revenue tool, not just a discount tactic, will see the biggest gains.
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