Boost Revenues With Bundles and Kits

Adding targeted product groupings that give your business customers more for less, or that present solutions to their needs, certainly will boost your catalog’s revenue base. Product bundles and kits easily fit that bill.

An example of a bundle offer for a consumer catalog: A cookware catalog that sells kitchen knives could sell a paring knife and a filet knife but offer both together at a modest discount.

A kit differs from a product bundle in that it ultimately marries products that will complement one another under one SKU and gets the customer to an end goal of some sort. Keeping with the example of the consumer cookware catalog, a kit might include not just the paring knife and filet knife but perhaps an entire set of kitchen knives plus the storage block, all for a special value.

Following are answers to some frequently asked questions about bundles and kits.

Why offer bundles and kits?

Because it’s logical, and it works. Think of bundling as predetermined upselling and cross-selling, a process of creating a standing form of customer specials that, when built right, can drive up your business-to-business (b-to-b) catalog’s average order value (AOV).

Creating bundles and kits also can allow your business to be less than perfect in other areas. For example, a good bundling strategy will cover some of the shortcomings that many Web sites face with respect to under-performing upselling and cross-selling capabilities. Most of the companies I come in contact with lack real-time, data-driven, online upselling and cross-selling features. And virtually all of those companies are finding that each year the overall percentage of orders going to the Internet is greater by double-digit percentages than the prior year. Most of them still find the online AOV is only 85 to 90 percent of that generated on a phone order, where a call center rep can actively increase the value of the order.

In other words, the more customers who order from your Web site, the more orders you have to generate to produce the same amount of revenue. If your site doesn’t currently do a good job of upselling and cross-selling, try offering bundles and kits to encourage customers to spend more money with each site visit.

Won’t the discounts associated with the bundles and kits be counterproductive to profitability?

Not necessarily. One of the reasons bundles work is fulfillment. Once you’ve pulled a box and affixed a label, typically only minor costs are associated with adding items to an order. In other words, it may cost you no more to process a $50 order than it does to process a $25 order. So shouldn’t it follow that you might be willing to forgo a couple of margin points to get the average order value up? It should.

But there’s a flip-side. Some of the products you sell undoubtedly are maximized in terms of the box or package you can ship in. If items in your assortment require special shipping, pairing them with an accessory product to create a bundle or kit may not be feasible from an operational standpoint — you may not be able to ship it.

Similarly, drop-shipped items can create challenges, as two parcels are required to get the order out, and shipping advantages would therefore be lost.

How should I select products to bundle?

Like most decisions in the catalog environment, determining which products should be sold together or in quantity can and should be a data-driven decision. A merchandise-affinity analysis often can shed light on popular product combinations.

To help you make a determination, answer these questions:

1. Which of your products are most frequently purchased with another product?

2. Which products are most commonly purchased in quantities of more than one?

3. Which products have the shortest repurchase periods?

The answers to these questions (and similar ones) should provide direction for product groupings.

Your customers and merchants also are critical to your decision-making. Call center reps get feedback from customers requesting different types of items from your catalog, but few companies have a formal way of dealing with that demand. Good merchants, too, have a fundamental understanding of how customers use products and which items might work well together.

Bundles don’t have to be “bundles” per se. You don’t have to take two individually sold items from the catalog and put them together with a burst that says, “Buy them both and save,” though, that’s certainly one way to do it. A bundle can be a new product introduction, business gift set, or new package developed and introduced as a result of the merchandise analysis discussed above.

For example, say you sell baskets of crackers and cheese that your b-to-b customers buy as client gifts. You find that you also sell caviar and nuts as popular add-ons to those baskets. Use that knowledge to create new b-to-b gift packages at key price points to improve the overall assortment and generate higher AOVs.

How should I price bundles and kits?

Generally, bundles are a value following the “buy two and save” or “buy the outfit and save” design. But there are occasions when your bundles might warrant premium pricing.

For example, if you’re offering an assortment of items together under one SKU as a kit that provides the customer with a solution — and the customer can’t easily get the individual items from you or any other single source — consider selling at a modest premium for developing and sourcing the solution for the customer. This practice is uncommon, but keep in mind that “bundle” doesn’t always mean discount.

Any tips on developing creative to sell bundles and kits?

We have a saying in our office: “If you don’t show it, you won’t sell it.” And so it goes with bundles.

Sometimes, particularly in larger catalogs that are paginated by category, it’s difficult to sell two items you want to bundle together. Those catalogers often end up relying on page references to tie two items together.

Ideally, however, you’d like to show the two items near one another and draw attention to promotional copy about buying them both. In categories like computers and apparel, how you show items you want to bundle in relation to one another is critical, as the suggestion of the kit or bundle plays an important role in the suggestive selling process. In any category though you’ll have greater success selling bundles and kits when they’re prominently shown as a unit at a value price.

Conclusion

Offering myriad bundle and kit solutions increases the size of your overall assortment and variety of price points you offer customers — which in turn generally increases your b-to-b catalog’s AOV and response rates. You don’t have to go bundle crazy; a good target would be 5 percent to 10 percent of the overall product mix.

Steve Trollinger is senior vice president of client marketing at J. Schmid & Associates, a Mission, Kan.-based consultancy. He can be reached at (913) 236-8988 or via e-mail: stevet@jschmid.com.