Product bundling is a strategy in retail that involves creating and selling a curated collection of complementary products can help you capture both casual browsers and eager-to-buy shoppers.
Every retailer shares a common goal: to earn more revenue.
The ways in which retailers go about meeting that goal vary, however. Some prefer to focus on their customer loyalty program. Others turn to expanding into B2B wholesale channels. And those are just two on an infinite list of tactics you can employ to increase sales.
Another great way to help retailers achieve revenue goals is product bundling.
But as with most other sales tactics, there’s an art to bundling products successfully. Here’s what you need to know.
Table of Contents:
What is product bundling?
Product bundling is when a retailer packages complementary products as a group of items that can be purchased together.
Sometimes products are bundled together as an upsell or a cross-sell.
- Upsells involve persuading the customer to upgrade. For instance, promoting a better, more expensive version of a makeup brush a customer is thinking about buying.
- Cross-sells involve promoting related products that are adjacent to other products in a similar group. For example, promoting blush to go with a makeup brush. In the world of physical retail, this is similar to the concept of cross merchandising.
Sometimes, retailers package the product bundle in a way that’s unique to the bundle, either in a gift box or special wrapping.
Product bundles become especially popular during the holidays, but it’s a tactic that retailers can use year-round to generate sales.
Generally speaking, there are two types of product bundles:
Pure bundles, which contain items sold exclusively in that bundle. For example, the Dyson AirWrap is sold with detachable blow-dry heads that you can only get when you purchase the set.
Image source: Dyson
Mixed bundles, which contain items also sold separately. A good example: Kylie Cosmetics lip kits. These kits are made up of a lip liner and lipstick, each of which can be purchased separately, but are bundled together for convenience (and because they’re complementary products).
Image source: Kylie Cosmetics
What is price bundling?
Sometimes product bundles are offered at a discount or with an added value, while other times price bundles are curated.
A retailer chooses a few specific items that must be bought together in order to obtain the discount, or the bundle is offered as a general discount for purchasing multiple items. Buy-one-get-one (BOGO) discounts are an excellent example of a price bundle.
The idea behind pricing bundles is to reduce the “pain of paying” (aka the negative feelings associated with spending money) for the customer.
By offering a bundle discount on the total price or by adding a perceived value (like a “free” item), the customer feels they got a good deal—even though they’ve likely spent more than they planned to.
Image source: Neuroscience Marketing
Oddly enough, curated bundles can seem like a deal to a consumer even when it isn’t saving them any money.
Soxy.com, a sock retailer, raised its AOV 358% with bundling, despite the fact that more than a few of its bundles are actually more expensive than buying the same amount of socks individually.
The grouping of items leaves the buyer less focused on the price of individual items (and the bundle seems like a better deal).
Other retailers, like women’s intimates company Lively, have also found that price isn’t always the deciding factor when shoppers are making purchasing decisions. A positive customer experience can be just as powerful as a great deal.
“One thing that we learned that was very interesting is, at Lively, we believe in price equality, so we don’t acquire customers for price, for sale, or for discount. We acquire them for brand," said Michelle Cordeiro Grant, Founder of Lively.
"Behind the scenes, once you discover Lively, you’ll realize that all bras are $35 regardless of size, style, and color. We feel like it’s our responsibility to deliver an experience to a customer where they’re truly choosing what they want.”
"We don’t acquire customers for price, for sale, or for discount. We acquire them for brand."
Product bundling advantages
Product bundling provides many benefits to a retailer as well as the consumer. Let’s look at a few reasons it’s become such a popular tactic amongst retailers.
1. Increased sales
A study from Harvard Business School demonstrates how powerful product bundling can be as a tool to increase sales.
Essentially, the study examined a tactic Nintendo employed when selling video games and consoles. The gaming brand bundled the two products together, leading to 100,000 units sold and more than a million dollars in video game sales. When Nintendo only bundled games together, bundle sales decreased 20%.
The effect isn’t limited to Nintendo either. Retailers increasing their sales and AOVs thanks to product bundling include:
- Hydrant, a hydration beverage, raised its total sales about 40% when it introduced product bundles.
- Doe Lashes, a retailer of Korean silk false lashes, raised its AOV 86% after launching bundles.
- Nutritional supplement store HVMN’s AOV shot up 111% when it started offering mix-and-match bundles.
- Natural cosmetics brand Curie’s AOV increased by 56% during 2020, primarily due to the introduction of bundles, with one of these bundles ranking as the second highest item by sales dollars for the year.
- Sunwink, a sparkling beverage company, launched a variety pack bundle that now accounts for 50% of its online business. The majority of second-time buyers also return to purchase variety bundles in lieu of one-off orders.
- Beauty brand Aisling Organics sees about 30% of its total direct-to-consumer sales come in the form of product bundle purchases.
So how does bundling items increase sales? Because it helps increase the perceived value of products in the eyes of your customer.
What’s more: product bundling can also help increase your average order value. Encouraging shoppers to purchase more items typically leads to a higher transaction amount, which is an efficient way to boost revenue.
2. Pricing opacity
While bundling can be used to provide discounts, it can also be used to build upsells into a package, thus blurring the focus around the price of individual items.
For example: when you purchase a new smartphone, you also receive a charger in the box. The charger isn’t free, of course. Its cost is built into the phone’s final ticket price. Phone retailers know if customers had to purchase a charger separately, many wouldn’t. Most of us already have the correct charger at home.
Using bundling in this way can help reduce friction in your shopping experience in a few ways:
- Less pressure around necessity. Harvard Business Review’s studies show that pricing opacity helps decrease pressure consumers feel to fully use up or finish an older product they’ve purchased before buying another (or a newer version).
- Less effort. When products are left unbundled, each item presents a whole new buying journey to the customer. Ultimately, it can result in the customer overthinking the purchase (and even opting not to buy anything at all). When you bundle products, however, the customer only sees the single price tag, saving them time, effort, and mental energy.
- Best experience. Building an opaquely priced bundle also ensures that each customer gets the most upgraded product experience you have to offer.
If you find that customers are often put out at the thought of having to purchase yet another small item to complete their set or experience, consider bundling those items to remove that obstacle to purchase.
3. Surplus inventory reduction
Product bundling can also serve as an important tool for reduction of surplus inventory. Bundling slow-moving inventory products with popular ones can help move stagnant items.
Plus: when you bundle a more stagnant product with a popular one, you’re creating a new product offering, which helps freshen up your old or overstocked inventory.
“Product bundles can help improve unit (per transaction) economics and can increase the velocity of unit sales… particularly for bundled items…which in turn may provide economies of scale for the brand over time.” — Nate Poulin, Digitally Native
Wild One, a pet goods retailer, created a number of “kits” (see also: product bundles) that combine popular items with less popular items. One kit has a dog leash, harness, and a waste bag carrier.
The bag carriers aren’t as popular amongst dog owners, as many tend to simply keep bags in their pocket. But by tying the bag carriers to the much more popular and complementary leash, Wild One can move more bag carriers overall.
Image source: Wild One
“I think the biggest opportunities brands have with bundling is using them to sell off unpopular or obsolete stock by creating bundles that blend slow movers with bestsellers. That, in my mind, not only creates higher AOV, but better quality AOV.” — Adii Pienaar, Cogsy
4. Increase product awareness
Product bundling also gives customers the chance to try a product they wouldn’t have typically purchased as a standalone item.
For one example of this, we can look to LoveSeen, a false lashes retailer. It sells a starter kit bundle that includes not only lashes but also lash glue and lash tweezers.
Image source: LOVESEEN
Most people don’t try lash tweezers because they’re not entirely necessary to the process of applying lashes. However, when sent within the product bundle, customers have the chance to see how much easier lash tweezers make the application process. They may even discover that they would purchase another pair individually in the future.
The best part: offering this product bundle offer has increased LoveSeen’s AOV by 15%.
5. Boost customer loyalty
While it may be a surprise, offering product bundles can also help boost customer loyalty. The reason: bundles give buyers the chance to try multiple products at once, which means more opportunities for them to find items they love (and then buy over and over again).
“Bundling can be an effective means of encouraging trial and habituation, as it does a lot of the heavy lifting for the consumer. They don’t need to put as much thought into how something fits into an existing routine, because the bundle shows them how.” — Emily Singer, Chips & Dips
Direct-to-consumer alcohol brand Haus found that by offering “duos” and sampler kits (bundles of various drink flavors in smaller-sized portions), they were able to increase the likelihood that customers would come back and buy again.
Image source: Haus
“We’ve found that customers who order more than one flavor within their first purchase are far more loyal,” said Helena Price Hambrecht, co-founder of Haus. “And in the end, it doesn’t matter how big a first order is if the customer never comes back.”
FURTHER READING: Learn more about bundled discounts and other types of discounts you can use in your retail business.
Product bundling statistics you need to know
As you begin to shape your bundling strategy, here are a few statistics you should consider and keep top of mind.
- Buy-one-get-one (BOGO) promotions are a customer favorite when it comes to types of product bundling. 66% of consumers say that BOGO is their favorite type of deal, while 93% of consumers have purchased a BOGO offer at least once.
- For ecommerce sites, upselling is 20x more effective than cross-selling, according to Econsultancy.
- Studies show you can reduce your return rates simply by calling one of the items in a bundle a “free gift.”
- Research suggests that 10%–30% of ecommerce revenue comes from upselling and cross-selling via product bundles.
Product bundling examples and tactics to try
Now let’s look at some actionable tactics around product bundling you can put to use right away.
How you choose to put together a bundle will depend on your goals and products, but keep in mind that product bundling methods seem to be limited only by a retailer’s creativity.
Gifting product bundles
Holidays can be a stressful time for consumers. Long lists, last-minute needs, and lack of knowledge about giftees’ interests stand in the way of knowing what to buy.
One way to meet customer needs during holidays is to take a gift-giving approach to product bundles, which makes it easy for shoppers to find and purchase a done-for-you gift.
Clean beauty brand Lush uses this very approach. The gift section on its website features multiple product bundles at many price ranges. It also merchandises the items together for in-store displays, and its hands-on associates can make smart recommendations for shoppers to get in and out of the store quickly.
Image source: Lush
Au Lit Fine Linens takes a different approach. Given that linens are most popularly gifted at weddings, it has a page for creating a gift registry. On the page, it offers a Newlywed Starter Kit. The kit puts together a bundle of essential linens every household should have. This registry then ensures that the wedding guests can purchase an array of useful products for the new couple.
Image source: Au Lit Fine Linens
Subscription boxes are product bundles in their own right—and they’re not just for ecommerce retailers. Many brick-and-mortar retailers have begun their own subscription box services.
WineCollective is just one example of a brick-and-mortar shop that has capitalized on an opportunity for product education and curation with subscription boxes. After noticing a number of in-store shoppers who were struggling to purchase the right bottle of wine, they took the difficult decision making out of the shopping process.
Image source: WineCollective
This allowed customers to subscribe to curated boxes of items, while giving WineCollective the opportunity to bundle products it wants to get in shoppers’ hands, to educate their customers, and to broaden their palates, all at once.
“By bundling products, we can take some of the guesswork out of the shopping experience and deliver more value,” said Lalo co-founder Michael Wieder.
Build your own bundles
Some retailers have experimented with a DIY approach to product bundling, allowing shoppers to create their own collection of goods. This may seem counterintuitive to the idea of building product awareness, but you can still encourage product discovery by allowing customers to choose from a set group of products, limiting their choices to the items you want to promote.
Nutrition and supplement company HVMN found that by offering “mix and match” bundles (which allowed shoppers to select their own flavors of their MCT oil powder or Keto Collagen+ and build out their own product bundle), its average order value shot up to $108.
Image source: HVMN
Women’s fashion brand M.M. LaFleur also offers a build-your-own curated capsule wardrobe collection it updates regularly. When a customer purchases two or more pieces from the capsule collection, they get 15% off the items.
Image source: M.M. LaFleur
The brand saw a 20% increase in AOV for orders that included product bundles like sets, capsules, or bundles versus those that didn’t (excluding sale-only orders). It also saw a 27% increase in items per transaction with orders including sets, capsules, or bundles.
This tactic isn’t limited to online retailers, either. A retail store owner could take a similar approach by hosting a build-your-own gift bundle event or allowing in-store associates to help shoppers build their own bundles, with in-store gift wrapping available, too.
How to create product bundles
The process of creating a product bundle can vary quite widely depending on the bundle, but there are some important principles to follow.
How to decide what to bundle
The products you choose to bundle will be determined by the bundle type you choose to accomplish your goal.
Let’s look at how to choose products for three of the most common bundle types:
- The buy-more-save-more bundle is typically applied to your entire store or to select categories of merchandise that you carry. This technique is particularly useful for driving sales of stagnant inventory. Most often, you will choose the items for this bundle based on what your slowest moving inventory category is.
- Quantity discount bundles are intended to sell multiples of the same product. Here you choose which replenishable items you want to promote. You could choose the replenishable items based on bestsellers to increase AOV. You could also experiment with seeing if quantity discounts help move stagnant replenishables.
- Leverage data. Because pre-packaged kits are most effective for products that are complementary or meant to be used together, choose items that your data tells you are commonly bought together. For instance, if you have a history of customers purchasing socks with shoe purchases, that’s a solid indicator that you have an opportunity to sell a bundle.
Don’t overdo it with the bundling strategy. Pick one or two approaches and lean into those to ensure you’re not overwhelming your customers.
“Brands should choose one or two of the many bundling techniques to focus on in their pricing and promotion strategies. All pricing techniques are not created equal. Some methods will be more effective depending on the products bundled.” — Taylor Daniel, merchandise planning expert and ecommerce inventory management consultant at FOMO agency.
If you’re still unsure of where to start, analyze your stock-to-sales ratio to discover which products or categories are stagnating.
To calculate stock-to-sales ratio of a product, calculate the contribution a SKU or category makes to your total unit inventory and compare that to its contribution of your total unit sales.
Stock-to-Sales Ratio = Percent of Stock ÷ Percent of Sales
How to calculate bundle price
Calculating your bundle’s pricing can be straightforward if you’re not offering any discounts.
To calculate the bundle price, you first need to know your gross margin on each product in the bundle. To calculate gross margin dollars of a product, subtract the cost of goods sold (COGS) from the total selling price.
Gross Margin Dollars = Ticket Price - COGS
- For brands with average margins 50% or higher, shave between 10%–20% off of the subtotal.
- For businesses where average margins are 50% or less, a discount rate between 5%–10% will typically suffice.
It’s also worth testing your chosen discount over time to see what performs best.
How to name your product bundle
Naming your bundle impacts how you draw attention to your new offering.
An excellent naming best practice is to call the bundle by the benefit it provides a customer. For instance, belif’s skincare bundles are all named for what they do.
The skincare bundle for dry skin is called Our Belief for Dry Skin.
Image source: belif
Calling attention to the overall benefit of the bundle tells customers from the get-go why they should purchase all of these products together rather than just one of them.
Best practices for marketing your product bundle
There are a host of ways to promote your product bundles, but let’s take a look at some of the best practices retailers have developed over the years.
1. Display the discount information prominently
If your bundle is intended to offer a discount or value-add, it’s important to display that information prominently on your product page and within your marketing efforts. Making the discount a key part of the bundle reminds shoppers they’re getting a good deal.
As an example, women’s undergarment brand ThirdLove prominently displays its build-your-own-bundle promotion on nearly every page of its site and highlights the cost savings.
Image source: ThirdLove
Retail store owners will want to clearly display signage near their bundled or bundle-able products so customers recognize the deal, too. Sales associates should also be trained to mention the bundle as an option whenever a customer is looking at one of the individual items.
2. Use your bundles for gift guides
Another classic method is to promote bundles around holidays as easy gift options.
Many companies will create a gift guide landing page, which you can then promote via email, social media, and in-app. Here’s one example from mattress company Purple promoting its bundles as Valentine’s gifts:
Image source: Purple
Retail store owners can spotlight gift bundle displays by their registers with shoppable displays so customers can grab everything they need in one swoop.
3. Offer your bundles at checkout
Offering a bundle at checkout can help a customer pull the trigger on multiple items.
“A lot of brands offer subscribe-and-save discounts, but some consumers these days are wary of that; they want the savings, but don’t want to track subscriptions on dozens of different sites. Bundles are a happy solution and work especially well when promoted at checkout.” — Michael Brandt, CEO at HVMN
At a brick-and-mortar, that may look like the sales associate mentioning that if the customer adds one more item to their purchase, they get 15% off everything. Online, it can be presented as messaging during the checkout flow.
Product bundles: a winning strategy
Product bundles are a great way to increase the perceived value of your products and encourage customers to spend more in your store. Use them for gift-giving occasions, slow-moving stock, product awareness, and other creative ways to drive more in-store sales.
“I strongly believe that the benefits of bundling, which go far, far beyond an increased AOV or revenue growth, are a strong incentive for everyone to invest the time to strategize/test to get it right.” — Jake O’Donnell, The Ad Nerds
Working on your omnichannel selling strategy?
We sat down with Michelle Cordeiro Grant to learn how they're doing it over at Lively with the help of Shopify for their POS and online store.Read her advice here