Bundling products is a tried and true tactic. Offering ‘extras’ or ‘throwing in’ cheaper products is a tactic that has been used by marketers for decades to increase sales of expensive goods. It’s a standard part of the marketing toolkit…
…so it must work. Everyone wants to get the most they can for the least possible, right?
We don’t even question it.
Yet what if you discovered that customers will in fact pay MORE for LESS? New research published this year suggests that, in reality, customers will actually pay more money when products are not bundled together.
When I read an article on this topic published by The Harvard Business Review in June this year I was extremely intrigued. Does this mean we shouldn’t bundle products? What implications does this have for online marketing in general and, in particular, email remarketing? Can we get away with selling more products if we keep them at their original, isolated price and, perhaps, even add a premium?
When bundling turns a customer off
Would Vince have sold more if he didn’t bundle?
Customers are particularly affected by this phenomenon when an expensive item is bundled with a cheaper item (or items).
Humans categorize everything: it’s a useful way of skipping brain cycles and, in many cases, it works. For example, the graph below (from the Harvard article) shows that customers who were offered a home gym (valued at ~$3,000) and a DVD were less likely to purchase this option than those who were offered the home gym alone.
Moreover, the difference is substantial. When bundling the cheap DVD with the expensive home gym, 30% less customers were willing to buy the product.
Image courtesy of Harvard Business Review (see the full article).
How this plays out in the real world
Coming off the back of Cyber Monday and and the Holiday period, there are lots of great examples of customers who have been bundling products as part of sales over the last few months.
Take this example from GameStop a few weeks ago:
It would be curious to know if the Lego pack adds or detracts value here. Although not wildly varying in price they are wildly varying in appeal. I love PS3 but (perhaps unfortunately) no longer play Lego. Perhaps this actually means I’m less likely to buy a PS3!
An example I’ve cited before is this camera bundle cart abandonment campaigns from Buy.com:
As I’ve always said, this is an effective strategy to move accessories and increase sales of the item itself (for abandoned carts or interested customers). However…would an A/B test on this remarketing email simply offering customers the camera at 20% off have let Buy.com sell less for more?
Here’s a snapshot of our Christmas Special. As you can see we’re bundling like everyone else:
This offer worked nicely but the question in my mind after reading this article was could it work better? Could I have given away less and actually converted more?
I read this article after running our special so the closest numbers I can get are to compare the conversion rates on this offer to our standard landing page. The fact is: our default landing page converted over twice as well as this special offer.
Although not a strict A/B test I think this is at least one example of where bundling has not increased overall sales!
The secret takeaway for the savvy marketer
The secret you should take away is that you should test your offers. If you’re bundling a high value product with a relatively low value or free product then you may be negatively affecting into your ability to convert customers.
Don’t just take the ‘tried and true’ for granted. Get out there and test your own hypotheses!
Leave a comment and share where you have seen the findings of this study in action or where you currently bundle products as part of a special offer – perhaps we can run an A/B test!