“I’ll have a cheeseburger and fries.”
“Would you like to add a soda for only $1 more?”
Bundling is all around us. From the combo at the drive thru to the cable TV sports package, we’ve grown accustomed to bundling in everyday life. In the ecommerce world, product bundling is a versatile technique to increase revenue, move inventory, and provide a better customer experience.
Bundling benefits both the consumer and the merchant in various ways. For the merchant, adding more items to a single checkout grows average order value (AOV). Bundling a group of best selling products increases the likelihood of your customers getting exactly what they need, therefore extending the amount of time they stay subscribed and increasing lifetime value (LTV). Not to mention all the possibilities of perfecting the customer experience by allowing your customers to purchase exactly what they want when they want.
Price is obviously the largest benefit for consumers. Bundled items are generally cheaper than buying them individually so consumers feel they are getting better value. Additionally, the improved customer experience can add to a simpler shopping experience and boost brand affinity.
Types of bundling
For the purposes of this article, we’ll break down the term “Bundling” into two different types. While any group of items shipped together is technically a bundle, we want to explore the benefits of each subscription type and outline which verticals they may work better for. The bundling types we’ll be looking at are:
- Pre-bundled products
Pre bundled products are a group of items packaged together that are not editable by the customer.
This is the simplest way to take advantage of bundling and boost your average order value. There are several easy win combinations such as pairing two best-sellers with a new product so that customers can try something before committing or packaging five best sellers at a discounted rate.
Another popular option is to use bundling to create variety packs. How many times have you seen a new product, especially in the Food & Beverage vertical, and wanted to try the latest flavor but then play it safe and purchase the flavor you know you already like?
Create bundles to give customers the freedom to try a variety pack so they can sample several of your products without fear of overcommitting to one they haven’t tried yet.
In the Coffee vertical, let’s take a look at how Bulletproof Coffee enables bundling by packaging three different flavored ground coffee roasts: a classic variety pack example.
Think of it from a new customer’s perspective. They’re not sure which roast they’ll enjoy the most so they order the variety pack option, sample each roast and then on their next order choose a large bundle of their favorite flavor.
Alternatively, suppose the same customer orders the variety pack for his or her family. Maybe three or more people in the same household drink coffee and each likes a different flavor. A variety pack pleases multiple parties within one product purchase.
Kettle and Fire, sellers of bone broths and soups, is another example of bundling, this time in the Food vertical. They sell several variety packs of pre-bundled products to allow customers to sample different flavors.
For product variants like additional flavors, this is an easy way to increase LTV. To show how, let’s tackle a very simple question: When was the last time you ate the same meal for dinner four straight nights? A customer subscribed to one flavor of bone broth will use the swap feature in their Customer Portal to choose a new flavor for a period of time. However, customers will grow tired of manually making changes every time they want a new flavor.
A bundled group of various flavors will keep customers subscribed for a longer period of time because that variety is pre-built into the subscriber experience. Variety, after all, is the spice of life.
Move low-performing inventory
In addition to variety packs, one creative way to move products with low sales is to bundle them with other high performing products.
Let’s say your store sells flavored water packets. Your slow moving product is your new flavor that people seem hesitant to try. Sprinkle in that new product into a pre-bundled combo and now customers can sample it without committing to it fully.
Ecommerce 101 – never miss an opportunity for a positive interaction with your customer. You can use this method of bundling to do just that. Take a look at how Blume, a self care brand in the Health & Wellness vertical, uses a quiz to help their customers choose the product bundle that they’ll most prefer:
Psychology says choice paralysis can also affect customers when they’re overwhelmed with too many options. Most of us, when we go to the florist, buy the bouquet instead of choosing each individual flower. Help lead your customer to their decision, whether that’s through an interactive user experience like Blume or by using labels for pre-bundled products like “Best Seller,” “Recommended,” or “Starter Pack.”
Taking this labels concept one step further, the label “Recommended” (or using a “Featured” section) plays into the psychology of human purchasing decisions. Instead of actually packaging up your three highest performing products, choose the top two and one new product. While AOV stays the same, getting a new product off your shelves and into the hands of consumers increases the likelihood of them re-purchasing, thus increasing LTV.
Like the name implies, build-a-box allows subscribers to quite literally build their own subscription box of products from your store.
Customer experience is everything – don’t assume you know what your customers want. Instead, consider setting a quantity minimum for build-a-box and allow your customers’ imaginations to go wild.
For instance, designate three package sizes for your build-a-box option, 3 products, 6 products, and 12 products, and then give autonomy to your customers by enabling them to fill it exactly how they desire.
Do you have a product with a wide range of options based on customer preference? Products in the Health & Wellness vertical work well to employ a build-a-box model and allow customers to customize their order with each delivery.
Take a look at the customer experience with Hello Bello, which offers premium baby products, for building your custom diaper bundle:
Notice the x of 7 section on the bottom of the page. As the customer adds individual products to their box, it populates with the total. This ensures the customer is not getting error messages at checkout when they have accidentally chosen less or more than the required amount. Small UI additions like this make all the difference during a checkout flow.
We can see the benefits of this bundling option as well in the Food vertical. Once Upon a Farm, an organic family food company, uses build-a-box to let the customer choose the flavors they desire and how often they want that bundle delivered:
Once Upon a Farm uses a similar product counter (notice the xx/24 section on the bottom left of the page) to total the bundle for their customer.
Brands can get creative and offer a mix of the two bundling options as well. We can see an example of this with Lola, another brand from the Health and Wellness vertical.
Lola specializes in feminine care and combines the two bundling options with their Period Essentials combo. You can see this next evolution of bundling in action below, allowing customers to choose which kinds of compact plastic applicator tampons they want:
With this Lola example, if you look in the lower right section, as you select your products the box above populates and the xx/18 counter keeps track of how many choices you have left to make. Notice as well Lola’s use of brand colors throughout the bundling build that provide an aesthetically pleasing customer experience.
What does the data say?
After walking through various ways to bundle products and seeing examples of how merchants have enabled it, it’s time to dig into the numbers. We’ve made the claim that bundling increases AOV and LTV but is that claim supported? We analyzed a handful of companies that bundle their products in various ways and have found the following.
When you bundle more than one product together, the price is obviously going to be higher than one individual product. That goes without saying and it would be unfair to claim an increase in AOV simply because of quantity. You can’t sell one product for $10 but three of the same product for less than that, it just doesn’t make sense.
However, gross sales volume is a good indicator of the bundling packages working or not. In this case, a majority of bundled products saw not only higher AOV, but higher gross sales as well. This suggests that people are willing to purchase greater quantities in a bundle rather than waiting for shipments month over month.
But increases in sales doesn’t mean customers stick around. Maybe they’re just in it for the discount? On the contrary, these bundled products saw an average of 9% decrease in churn. Customers subscribed to these bundles are actually more likely to stay subscribed for subsequent purchases.
That all may be true, but the gold standard in subscriptions is LTV. Short term boosts in sales and retention are great but we’re focused on the long game. Based on the data, average charges per customer did favor individual products vs. bundled products.
That being said, it wasn’t enough to outweigh the average customer LTV. Because of the higher average order value, bundled packages saw an average of 47% increase in LTV. The evidence suggests bundling increases average order value, increases retention, and increases lifetime value.
There’s a simple reason product bundling is used across all types of businesses: Everyone loves a good deal.
Whether it’s a two-for-one product at the grocery store or adding a drink to your burger and fries, we are conditioned as consumers to desire good value purchases.
Benefits of product bundling for your online business center around organic ways to boost average order value which in turn raises lifetime value.
Factor in the opportunities bundling provides you to engage with customers and strengthen your checkout experience (whether through curated questions that direct them to the products they desire or pre-arranged recommendations they can purchase) and it’s easy to see it as a can’t miss feature.