Product bundle pricing: How to get it right

You probably see them every time you shop, both online and in real life. But because we see product bundles so often, it’s easy to forget why they're used.

Product bundles are actually primarily used to increase the potential audience for a product/sale.

Thinking about it from this perspective, it makes a lot of sense. If you have a selection of three different products in a bundle deal, you increase the number of potential buyers.

Instead of just attracting shoppers who are interested in item A, you now catch the attention of customers who are interested in items B and C too.

They may not be particularly interested in either of the other two items. But that’s where the reduced bundle price comes in.

They’ll still be getting item A for a reduced price. But they’ll also get the two other items for less than they usually would.

Choosing which items to bundle and what price to set is where it gets a bit more complicated.

It’s important to remember that there are different types of product bundle. Each has specific benefits when selling. Three of the most common types are:

These product bundle formats all have specific advantages for sellers, and they entice customers in different ways.

For example, free item bundles add a low-value item for free to increase the likelihood of a sale. The price for both other items in the bundle can then offset the loss on the free item.

The free item will often be a complimentary service or some other product, like software, which could return revenue in the future.

Standard categorized bundles have a different appeal. Bundling similar items together for a reduced price increases the likelihood of converting a sale. But, most importantly, it increases the average order value.

Then you have customizable bundles that allow the customer to pick items for themselves. These are great for giving the customer what they want, but it's harder to control what you sell.

According to research, certain bundle deals can trigger what’s known as ‘categorical reasoning’ among potential buyers. This can raise some issues for retailers.

A bundle containing an expensive item and an inexpensive item may be perceived by potential customers as lower in value than it actually is. This reduces their willingness to pay for it.

Categorical reasoning is a psychological quirk that can reduce the likelihood of a sale. But it’s only really an issue in specific circumstances. It’s important to remember that:

While people do have a tendency to categorize separate items together, it's usually just by one parameter at a time.

This means that sellers can actually use categorical reasoning to their advantage. All they have to do is get potential customers to look at the items in non-monetary terms.

For example, an outdoor store could bundle a tent with a protective waterproof ground mat. Even though the mat is cheaper, as long as the consumers considers it a benefit to the overall bundle in terms of durability or comfort, the normal categorical reasoning wont apply.

So, to recap. It does requires a certain level of promotion management to get product bundles right. You need to consider what you're trying to achieve - getting rid of excess stock, increasing sales, enticing new customers, or something else?

Then you need to think about how you frame the products in your bundle. Will customers see the overall bundle as a worthwhile purchase or will they think they're paying more for a worthless extra?