Whether you sell products or services, your company can benefit from a product bundling strategy. Emphasize savings Offering a discount is a great way to make your product bundles more appealing. This type of product bundle increases the perceived value: Customers are getting something that would normally cost $110, if purchased separately, for $75. By getting customers to buy this bundle instead of TV alone, the order value is 58% higher. It sets the value of TV alone, so all of the product bundles after it seem like a great deal based on the customer perception of the one product. You can use this same strategy with your product bundles by adding more expensive bundles, or selling the solo products at a higher price than when they’re bundled. In addition to bundling products with other items, you can bundle the same product or service with itself. The customized bundle makes it more enticing for people to buy. Customized options make the bundle so much more enticing. What types of product bundles is your business offering to increase the average order values on your website?
Every business needs to strive for growth.
This isn’t a secret. However, many business owners hear growth and they jump to customer acquisition strategies, new product launches, and ways to increase their conversion rates.
All of these tactics are great for your company growth. But, they’re not the only way to boost revenue and grow your business.
You can also grow when you make more money with your existing products, services, and conversion rates simply by increasing your average order value.
Are you currently tracking this metric? It’s easy to calculate with this formula.
How to calculate your Average Order Value (AOV)
In order to increase your AOV, you need to encourage your customers to spend more in each transaction. Sounds great in theory. We’ll walk you through how to actually accomplish it.
There are tons of ways to get your current customers to spend more each time they shop. One of the best methods for increasing AOV is with product bundling. This marketing tactic employs a combination of upsells, cross-sells, and discounts. It also helps you generate more profit by focusing on your pricing strategy.
Basically, the psychology behind product bundling entices people to spend more with every transaction simply by buying more things at once. As a result, your average order value will rise.
Whether you sell products or services, your company can benefit from a product bundling strategy. But it’s not as simple as lumping any two or three random items together. In fact, that can do more harm than good.
If you’ve never done this before it can be a bit of a challenge to determine which products should be bundled together and how to showcase those options to your customers. So use this guide as a blueprint for increasing your average order value. Here’s what you need to know.
Don’t pair inexpensive items with premium products or services
This is the most common mistake we see when businesses attempt a product bundling strategy for the first time. It makes sense: they’re trying to maximize their profits and someone is buying something cheap, why not try to get them to buy something that’s expensive too.
Product bundling doesn’t mean you should just throw any two or three items together and assume your customers will pay more for them.
Put yourself into the mind of the consumer for a minute here.
For example, let’s say you’re shopping for a new car and your price range is roughly $20,000. If the dealer throws in a free t-shirt and a baseball cap with the purchase of a vehicle, is it going to entice you to buy the car?
Or, on the flip side, let’s say you’re shopping for a t-shirt and a baseball cap with your favorite car company logo on them. Together the two cost about $40. But then, at checkout it’s suggested you buy a car, too. This brings your total to $20,040. Do you do it?
Two items that don’t belong together are not a product bundle. This is especially true if one item is significantly cheaper than the other. But so many brands think two items = a bundle, and it ends up hurting them.
Instead of encouraging your customer to buy more things, a grouping like this actually confuses their initial purchase. Let’s take a closer look.
There’s a study from the Journal of Consumer Research on consumer perception and product bundling called The Presenter’s Paradox.
Here’s what happened. They gave people two options of how to bundle products for prospective customers. The first option was an iPod Touch bundled with a cover. The second option was an iPod Touch bundled with a cover and a free song download. Nearly everyone (92%) chose the second option, which included the free download. However, the study concluded that consumers were willing to pay more money for the first bundle, without the song download.
Why? The benefit and cost of that download aren’t enough to enhance the perceived value of the bundle.
In fact, the cheaper item — One song? What am I going to do with one song? — lowers the perceived value of the total package. That’s not what we want to do. Rather than diminish the perceived value of a bundle, we want to increase it. You can charge more for your products by enhancing the perceived value.
A cheap add-on paired with a premium product makes the whole bundle feel less appealing to the consumer.
This Harvard Business Review article discusses a set of similar studies that had the same results. The study showed that consumers were more likely to pay $2,299 for a home gym than they were to pay that very same amount for the same gym was bundled with a workout DVD. Again, that’s because a DVD doesn’t enhance the perceived value. It actually has the opposite effect and lowers that value.
So if you’re currently using a strategy like this, it could be hurting your average order value as opposed to helping you out. You can fix this quickly and easily.
This guide will also you examples of the right types of products and services to bundle.
Offering a discount is a great way to make your product bundles more appealing. It’s a very simple strategy.
If a customer buys two or more items together, their total purchase will be cheaper than if they bought each one individually. However, you need to make it obvious that they are saving money. So tell them exactly how much money they can save by buying the bundle.
Here’s a great example of this from Lowe’s.
The product bundle here is a washing machine and a dryer. If customers buy the pair together, they can save $340. The customer might think, That’s getting close to the price as of either the washer or…