What is Bundling? A Strategy to Combine Products and Services to Increase Sales

Bundling is the practice of creating product and service packages. It's a marketing strategy that businesses can use and is considered one of the most powerful and consistently popular methods. Its main feature is combining multiple items to meet customer needs and create value. Today, we will learn more about what a product bundle is and what needs to be considered for Bundle Pricing, so your business can apply it to maximize its potential for increasing sales.

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Article Contents

• What is Bundling? What Types of Businesses is it Suitable For?
• How are Bundling and Unbundling Different?
• Advantages and Limitations of Bundling and Unbundling
• How Many Types of Bundling Are There?
• Examples of Bundling
• Bundling: A Sales-Boosting Strategy Businesses Should Know and Use

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What is Bundling? Turning Small Purchases into Big Ones

Bundling is a marketing strategy where a business combines multiple products or services and offers them for sale as a package. The key feature of this strategy is setting the package price lower than the cost of buying each item separately to stimulate sales and customer demand.

The products or services combined in a package may be related to each other to add value and make the purchasing decision easier for customers. Alternatively, they could be diverse products that still meet the needs of a specific target audience, offering convenience and value in a single purchase.

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How are Bundling and Unbundling Different?

Bundling is a marketing strategy where a business gathers multiple products and services into a single package to focus on profitability by selling items in large quantities. In contrast, Unbundling is the process of separating products or services that were previously sold as a package to be sold as individual items, allowing customers to choose and purchase only what they specifically need.

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Advantages and Limitations of Bundling and Unbundling

Choosing to market with Bundling and Unbundling strategies comes with different advantages and limitations, depending on the nature of the business and its marketing goals. Here are some key interesting examples:

Bundling

Brand Examples

• McDonald’s: Value Meals that include a hamburger, french fries, and a drink in a single set.
• Microsoft 365: An office software package that includes Word, Excel, PowerPoint, and Outlook.
• AIS Fibre: Packages with Bundle Pricing for internet combined with satellite TV services.

Advantages

• Helps increase the average order value as customers get multiple products or services at a better price.
• Provides convenience for customers by eliminating the need for multiple purchase decisions, making the process easier.
• Reduces marketing and logistics costs by promoting and shipping items as a single unit.

Limitations

• If customers do not want every product or service in the package, they may feel it's not a good value and decide not to buy.
• Reduces flexibility in individual pricing, making it harder to run promotions for specific products or services.
• Outstanding products or services can be easily overlooked when bundled with less popular items.

Unbundling

Brand Examples

• Airlines: Separating the ticket price from ancillary services like baggage allowance and seat selection.
• TrueVisions: Allowing customers to subscribe to packages based on specific channels or categories of interest.
• Spotify: Separating its music streaming service from its podcast service, allowing separate subscriptions.

Advantages

• Customers can pay for only what they truly want, which increases satisfaction.
• Businesses can adjust prices or promotions for each service independently.
• Allows for a focused effort on improving the quality of the main product or service.

Limitations

• Managing SKUs and promotions becomes more complex due to a larger number of individual items or services.
• Separate packaging or inventory management for individual items may increase production or packaging costs.
• Customers may feel that buying items separately is more expensive compared to a bundled package.

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How Many Types of Bundling Are There?

Bundling, or grouping products, is an effective online marketing technique for stimulating purchases and increasing order value. It can be divided into five main popular types:

1. Pure bundling

Pure bundling is a strategy where multiple products are sold together as a package only; they cannot be purchased separately. This requires customers to buy the entire set if they want any single item, which is suitable for creating a sense of value for special deals and encouraging customers to buy more items.

2. Mixed bundling

Mixed bundling combines offering a package with selling items individually. This gives customers the choice to buy the whole package or single items, providing more flexibility and catering to a wider range of customer groups.

3. Price bundling

Price bundling involves setting the package price to be cheaper than buying each item individually. It focuses on attracting customers with an appealing price offer, helping to increase sales and effectively balance inventory.

4. Cross-sell bundling

Cross-sell bundling uses the technique of recommending a complementary product when a main product is purchased, such as selling a smartphone with a case or screen protector. This increases the order value and encourages customers to try other products in a single transaction.

5. Upsell bundling

Upsell bundling involves creating a package that pairs a premium or upgraded version of a product with a standard one to entice customers to pay a little more for greater benefits.

Currently, the Bundle Pricing strategy, which is setting a package price, is one of the most popular and widely used strategies in various business types, especially in E-Commerce, because it helps increase sales and makes products and services more attractive. Here are some examples from interesting businesses:

• Related Products Bundle: Escalade Sports offers a complete Pickleball set, including a net, paddles, balls, and a carrying case, allowing customers to be ready to play immediately or buy each item as needed.
• Gift Bundles: LVLY creates gift baskets with flowers, chocolates, and drinks for special occasions like birthdays or anniversaries, making gift selection easy and valuable.
• Subscription boxes: WineCollective curates and sends wines to members every month, turning the hassle of choosing wine into a convenient experience and building long-term customer relationships.
• Buy-one-get-one bundles: HiSmile offers packages that include multiple toothpaste flavors, encouraging customers to try new ones and increasing the order quantity per purchase.
• Inventory clearance bundling: A fashion clothing store bundles slow-moving stock, such as sandals and sunglasses, with popular outfits at a special price to accelerate stock clearance and attract customers with a great deal.

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Bundling: A Sales-Boosting Strategy Businesses Should Know and Use

Bundling is an effective marketing strategy for boosting sales and increasing order value by combining multiple products or services into a single package in various forms, such as Pure bundling, Mixed bundling, Price bundling, Cross-sell bundling, and Upsell bundling. Each type allows businesses to choose the appropriate tool for their goals.

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