About this episode
In this episode Cary Richards, founder of infostack.io shares how he uses a product bundling strategy to grow his email list of engaged subscribers and drive business growth. Insights he shares include:
- How partnerships have helped Cary scale his business idea
- The critical ingredient to forming partnerships that support a product bundling strategy
- Why a product bundling strategy also helps grow an engaged email list
- How many products suit his ideal product bundle
- How to combine a membership site and product bundling strategy to drive business growth
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How a product bundling strategy can drive predictable growth
According to Sonya Keenan the growth problem that most businesses face is the issue of being overwhelmed by the many options available to them. Hiten Shah agrees that it is an issue, and says that focus and getting back to basics is essential
When you get back to basics, marketing is simple. Marketing means getting people in your store and once they are there—getting them to buy more. Online, this means the following:
New Signups = Traffic x Conversion Rate
So, what can you do to create simplicity in your marketing and drive predictable B2B growth? I put the question to Cary Richards of infostack.io, who employs the idea of a product bundling strategy by leveraging the existing work of other experts and influencers in the same or related space.
What is a product bundle?
A product bundle is a combination of several products or services sold to consumers in a combined package, also called package deals — a simple example of this being the Happy Meal at McDonalds.
Why use a product bundling strategy?
According to research, a product bundling strategy can work well if the buyer is given the option of buying the same products separately.
Benefits for businesses
In most instances, product bundles provide an opportunity to increase the average order value. While it is difficult to prove, we can look to Amazon’s experience to serve as a guide. According to the McKinsey report, 35% of purchases made on Amazon come from recommendations, some of which can be classed as bundles. A Fortune report indicates that Amazon has experienced a 60% success rate with recommendations. The takeaway here is that offering related products is a powerful way to grow revenue.
Other benefits include:
- Moving inventory: Having a bundle offer could help move inventory that is otherwise slow to move on its own.
- Increasing price opacity – Bundle pricing can make it difficult for consumers to compare line items. For example, a budget airline offers a ticket for $500 and then charges $10 for every kilo of luggage that needs to be checked. This approach can cause customers to look elsewhere as opposed to making a purchase. However, customers may be more likely to buy tickets with another airline that offers a ticket for $600 and includes 20Kg of checked luggage.
- Reduce buyer friction – Product Bundling can also reduce buyer friction by encouraging them to think about outcomes like the value that Adobe design apps bring in comparison to individual apps. Another example is Microsoft’s Office 365 suite. Office products are now available exclusively through a monthly subscription service, and there’s no way to pick-and-choose which products you want to pay for, and which you do not.
- Marketing simplicity – It is easier to market one product as opposed to having to market a few or several products.
- Increasing product usage – Bundling encourages people to sample and explore. For example, people who get Meisterbundle are more likely to explore MindMeister or MeisterTask as opposed to using just the one tool.
- Subsidizing feature development – Content or features that are bundled together can help subsidize ongoing development efforts. For example, when customers buy Microsoft Office, few actually use all the tools and advanced features. Nevertheless, by bundling various products together, the perceived value for consumers increases and, therefore, justifies a higher price point. The revenue can then be used to fund future feature development.
Benefits for customers
- It reduces the pain of paying – in instances of opaque pricing, customers are not easily able to identify the right price; bundling frees them from the cognitive burden of having to price each item or feature. Today, people can easily gain access to product pricing via the internet. The pressure to get the best or right price is always prevalent. Bundling, therefore, can work well for exclusive products and informational products.
- Reduced prices – When a discount is offered, price-sensitive customers are more likely to purchase as they are getting what they want at a reduced price.
Implementing a product bundling strategy
To create a successful product bundling strategy, ensure that it addresses the issues and concerns of your target audience. You also need to ensure that you have the resources, positioning and reach necessary to make your campaigns successful.
A few essential areas to consider include the following:
A key part of a bundling strategy, in case you do not have a bundle to offer of your own, is that reaching out to companies that provide related products and services.
For example, a WordPress self-hosting company could work with a design company that creates themes for WordPress sites, a VPN provider and a landing page or web form creator to provide a bundle that would help WordPress website owners manage their sites better.
To bring this together, you will need to reach out to potential companies and bring together a strategy that will serve the interests of each. This is a process that Cary Richards of infostack.io has improved and continues to refine.
According to Roger Dooley of Neuromarketing, we can benefit from studying successful infomercials. Why? Because they have been tested and are only shown regularly over time if they are known to make money.
He says that research shows that putting cheap products together might cause buyers to re-evaluate the deal and lower response rates. However, it seems unlikely that these companies would use such a strategy. Instead, what happens is that advertisers work on creating a high anchor point like thousands sold at $199. They then give the buyer a lower price of say four payments of $29.99. When the additional products are added into the bundle as deal sweeteners, the consumer is not evaluating price but appreciating the additional value.
Help navigate buyers’ thinking
Categorical thinking occurs when the bundle has products that the buyer categorizes as expensive and inexpensive. The buyer then cognitively tries to average out the price, which adds friction to the buying process.
To avoid the price comparison issue, you can help buyers focus on attributes that are not price related. For example, a SaaS company could focus on – personalized onboarding, performance, convenience, customer support levels, ongoing strategy calls, custom rollout plans, etc.
Use consumer expectations to your advantage
Bundles work better when they include products that are often used together. For example, bundling MS Excel 101, Advanced Excel use, Excel Formulas and Templates will likely sell better than a bundle containing MS Excel 101 and MS Access 101.
This knowledge is why Amazon is able to sell more related products. Their bundles focus on what buyers view as related.
In the SaaS space, bundling can drive improvements in customer retention, revenue, and customer experience. This is possible as long as buyers feel like they are getting value for their money. Bundling more services means a higher price point for buyers.
The figure below shows an example of the balancing act of a bundling strategy that companies need to address.
Therefore, to allay the concerns of a future customer, you will need to address the value in the following areas:1. Price:You must ensure the price point provides value to your future customers by addressing questions like, “Is the bundled price better than purchasing single features?” The Adobe pricing page certainly makes clear where a business would find value for money.
2. Usefulness:You should also ensure the products in the bundle work well together and are likely to be used regularly. Again, looking at Adobe; all their products address the need to create designs and are used regularly by any business design team.
3. Personal meaning/worth:Do your products/services provide meaning and worth to users? Can you articulate how they will improve someone’s life?
4. Benefit/gains:The benefits that your products or services provide is another essential area that needs to be addressed. Can your products or services simplify a process improve efficiency, or save money?
5. Support:Beyond the purchase, a customer will want to know if using the products or services will be sustainable in the long term through experiences that enable them to achieve their objectives. (e.g., What level of support will I receive? What sort of customer experience can I expect? What level of access and features can I expect with a purchase of the bundle?)
To create a successful bundle, you need to balance the actual products/services you provide with the value, benefits, and results that future customers can expect from using it.
Creating a customer-centric product bundling strategy
The actual products or services can help attract future customers, but it is the return on investment and the return in using those products that help retain them as long-term clients. To do that, bundles need to target your audiences’ outcomes. You need to compete not just on the feature set of products and services but also around how well they deliver measurable results that will help your future customers achieve their objectives. For example, in the crowded martech space, Digivizer provides digital marketing analytics to ensure that your marketing investments provide the best ROI with data to inform your strategies.
Bundles also need to be customer centric. Why?
Most churn can be attributed to poor customer service and customer experience. In fact, research indicates that you could gain a return of $3 for every $1 invested in customer support. Ensuring your bundles help create the best customer experiences can be a great differentiating factor in positioning your products/services.
The right bundle strategy can be a win-win for both you and your customer. When products and services work well together, they perform better together. Remember, however, that supporting the offer and ongoing customer experience is the key to making it all work.