Well hello there, Catherine Langman here, back with another episode of the Productpreneur Success Podcast. And today on the show, I’ll be giving you a mini training all about a fantastic strategy to help you make more money with your online store. Specifically…
How To Boost Your Bottom Line With Bundles
I’m sure we’ve all done it: ordered a meal deal at a fast food restaurant because it was just simpler to order, or better value. Or we’ve put more items in our shopping cart than we really needed because there was a “buy two, get one free” promotion.
Product bundling is a smart way for businesses to increase sales revenue, because customers spend more money per transaction, plus it’s a great way to ensure your customers have the best possible experience shopping with you, which helps increase your conversion rate, AND improves their experience using the products they’ve bought.
I want to highlight that last point: I think most people assume that product bundles are just designed to increase your sales because the customer is spending more per transaction.
But they can also help in two additional and extremely important ways:
- Make it much easier for customers to make a purchase decision, thereby increasing your conversion rate, and
- Help ensure your customers have a successful or enjoyable experience using your products.
For example, in my last business, which was a modern cloth nappy (or diaper) brand.
Initially we just sold the products individually and we offered a discount for large volume purchases. So it was something like $35 for one, and if you bought 20 you could get a 20% discount.
But we still constantly had questions from customers asking what they needed to buy. And sometimes we would have customers just buy one, but if you’ve ever used a modern cloth nappy, you would know you need more than one for the system to work, so only buying one to try generally didn’t get you a positive experience.
So we ended up putting together a number of bundles or ‘packs’ that made it easy for customers to figure out what they needed. We had a Trial Pack with a few nappies and accessories to give people a decent experience trying them out for a day. We had a Half Time pack for customers who were only using them during the day, or only using them at home but not at daycare. And a Full Time Pack, which is pretty obvious what it’d be used for.
After implementing these bundles in the business, our conversion rate shot up to over 5% (compared to the average conversion rate for eCommerce sitting at just 2%), our average order value was a healthy $150, and we had a really high returning customer rate as well.
Here’s what we all need to know about business – there are really only 3 ways to grow:
- Increase the number of customers who buy from you
- Increase the amount of money customers spend per transaction
- Increase the frequency of times each customer buys from you
With the right bundle strategy, you can actually improve all 3 of those methods of growth, and during today’s podcast episode I’ll walk you through how and why this works.
First, let’s just dive into what I mean by a Bundle. Basically a Bundle is a way to sell a bunch of products together in one transaction. Sometimes it’s discounted and offered as a Value Pack, and sometimes it’s just a bunch of products that go together sold in one transaction so that it’s an easier purchase decision to make.
In brick and mortar shops you see a number of brands and product categories using bundles and value packs.
One example is Lego. These days, Lego is one of the most lucrative toy brands in the world. And when you set foot in a toy store, you see row after row of different Lego kits. Unlike when I was a little kid, you very rarely buy Lego bricks on their own anymore.
Now, you can buy a Star Wars kit, or a Hogwarts kit, or a Minecraft kit, or a Marvel kit, or a Frozen kit, or any number of other themed kits.
And they come in various kit sizes and skill levels as well, with prices to match.
Not only do these packs make it easy for a customer to choose, because the inspiration for what to make is right there in front of you. But it also guarantees a certain average order value, it helps ensure the customer has an enjoyable experience building the kit out, and it’s really enticing to get the customer back again and again to move onto the next bigger and better kit or to collect all the kits in the theme.
Same with Play Dough. They do themed kits as well, with the dough and the accessories for the child to play a particular themed game or to make something specific.
Online, I love using the example of Birdsnest.com.au – an eCommerce store selling clothing and fashion accessories for women. They’re not a client of mine but I’ve been a customer of theirs for years, so I know their website really well.
Selling and buying clothing online is not a new thing anymore – there is a LOT of competition in that space – but even still, it’s not easy for customers to choose to buy clothes, especially if they’re shopping from a store for the first time. How will you know if it fits and suits you? There is an inherent risk on the customer’s behalf when buying from a store for the first time.
Birdsnest have a really great way of getting past this: They curate a big range of ‘styled outfits’, which they categorize in different ways. They’ll categorise them by style, like Boho or Corporate or Casual etc. And they’ll categorise them by the sorts of figure and preferences they suit.
And then they go one step further – they sell the outfits together on one page. They make it easy for you to select your size for each item in the outfit, and then you add the entire outfit to your shopping cart in one transaction.
Birdsnest don’t discount their products when selling them by outfit, which is their version of a bundle. Instead, the extra benefit you get is the ‘style advice’ and the way they make it really easy for you to shop.
Whereas in my previous cloth nappy business, we did incentivise customers to buy the larger packs by building in discount into those bundles. So ours were more of a value pack model.
Next – let’s discuss why it’s worth bundling your products.
First let’s look at how bundles help with the first growth lever – increasing the number of customers who buy from you. Basically, this means your conversion rate goes up.
How does it do this?
Firstly, it helps relieve the pressure of decision making. There have been numerous studies conducted over the years, that prove time and time again that even though customers like to have a choice, when they’re presented with lots of options, it becomes overwhelming and many will just give up and not make a decision to buy at all.
If you think back to the scenario I described earlier from my previous business – creating the value packs, the Trial Pack, Half Time Pack and Full Time Pack – made it really easy for customers to figure out what to choose.
There are many businesses like this as well. If you’re in a product category that can sometimes be difficult in an online ecommerce environment, this would work for you too. We work with several skincare and makeup brands, for instance, where selling in ‘kits’ that target different skin types makes it much easier for customers to figure out what they need.
The second way that Product Bundles help improve your conversion rate and increase the number of customers who buy from you, is because they enhance the customer experience.
Bundles give customers an opportunity to choose products and services grouped with their needs in mind.
A great example here is our client Bird on the Hill, who sell furniture paint. They’re able to put together ‘kits’ based on specific projects that customers might want to undertake.
Another client, Oz Inflatable Kayaks, sells bundles based around the different types of uses – such as fishing, or white water rafting, or 2-person kayaking, or kayaking with your dog, and so on.
Conversely – NOT using Product Bundles can actually hurt your conversion rate.
Obviously, if you sell something that’s difficult for customers to figure out what they need like I did with the cloth nappy brand, then your conversion rate will be lower without bundles than it could be.
But I’ve also seen scenarios where customers would usually need to buy lots of small or low priced items together, whether that be toys or fashion or food or personal care items or many other product categories.
And what happens is – the customer can feel like they must be about to spend a heap of cash because they’re adding all these many items to their cart. And they feel nervous so they just abandon their cart and don’t complete the purchase.
Or, it’s just too damn hard to find all the items and add them to their cart, especially if they’re on mobile, so rather than sit there figuring it out and persisting, they just give up and abandon their cart.
So, some really good reasons there as to why you would want to set up Product Bundles in your store.
Second growth lever – bundles help you to increase the amount of money customers spend per transaction, or your average order value.
How does it do this?
Bundles or value packs are one of THE best strategies for increasing average order value (AOV).
If you don’t know why AOV is one of the most important metrics in eCommerce, let’s take a look at this simple example:
- 1,000 units at $50 AOV = $50,000 sales
- 1,000 units at $100 AOV = $100,000 sales
So in that scenario – you have the same number of customers, same number of transactions, but you’re making substantially more revenue.
A low average order value is definitely something you want to work on, for a couple of reasons:
- It’s one of the easiest growth levers to adjust in order to increase your revenue, and
- A low average order value does actually make it hard to be profitable off paid traffic, and without being able to run paid ads to your online store it’ll be hard to grow at all.
What’s a low AOV? Normally, when running paid ads, I want to see an AOV of $50 or above. But realistically, what is good vs low does depend a lot on your product category.
To get a sense of where you sit in the competitive landscape, check out a bunch of other online stores in the same product category and see if they have a free shipping threshold. Oftentimes, that will be around about their average order value.
To increase AOV you could just increase your price, but for most businesses, there’s something called “competition”, where your customers will go if your price is too high.
Most eCommerce companies increase AOV by using things like product recommendation widgets on the bottom of their eCommerce product pages – you know, the Amazon strategy, that’s say things like:
- Customers who bought X also bought Y
- Frequently bought together
- Most viewed related products
Other common strategies to increase AOV include:
- Use a free shipping threshold – for example, free shipping on orders over $100, and
- Use an Upsell app that offers something at the checkout.
But the strategy that I’ve seen have the biggest impact on AOV would have to be Bundles. And we recommend this to clients in our agency business, if their AOV is quite low making it hard to be profitable when running paid traffic to a website. Adding in bundles or value packs always helps to increase that AOV.
Here are the three product bundling strategies you can use to increase your AOV:
- If you sell complementary products to your core product, offer a product bundle of complementary products. This is what Birdsnest does with their Outfits, and what I did in my cloth nappy business where I combined nappies and nappy accessories like wipes and nappy bags and a few other things together.
- If you sell a product people are likely to buy multiple times, offer more of the same products. This is what our client Klipsta.com does – you can buy multiples of their products, or just buy them as singles.
- If you sell a product that’s generally only bought once and you have no other complementary products, add in a gift card as well. Often you’ll find a customer will come back to spend the gift card on buying a gift.
And the third growth lever that I’d mentioned – increasing the frequency of repeat purchases. How can we do this using Bundles?
Well, usually a customer is going to come back for a repeat purchase because they had a great experience shopping from you in the first place.
And by using Bundles, you’re really setting yourself up for the best chance of achieving that great customer experience.
In my own previous cloth nappy business – we were able to give customers the best experience using our products because we sold them in the bundles in the first place.
The bundles included the nappies, or diapers, plus they included a selection of the accessories that parents generally needed in order to be successful using the nappies.
Some of those accessories were consumables, and some were reusable. And what we found, was that the customers would come back regularly to replenish their supply of the consumable items, like detergent and sanitiser solution. And they usually loved the reusable accessories so much they would come back for extras.
And because their overall experience was so positive, anytime we introduced a new design or a new product to the range, our customers were lining up like seagulls around a fish and chip store to grab them!
Similarly with Birdsnest with their clothing outfits. Every new season, it’s so much easier to go back to their online store to buy your new season’s outfits than to try and shop from other stores. Customers already know what’s going to suit their figure and style preferences on Birdsnest, so it’s easier to just go back and shop there than to shop around elsewhere.
Our client Bird on the Hill with their furniture paint – when you’ve used up the kit you’ve bought before, or you have a new project you’re working on, it’s so much easier to just go back and buy another kit.
Or if I think about the skincare and makeup brands that we work with. Usually we start by selling a trial pack, so it’s easier for customers to give the products a go without risking a lot of money up front.
Then, when they’ve had a good experience with those products, we can upsell them to a full sized pack.
And from there, because the products are going to be used up over time, the customers come back again and again to replenish items when they’re finished.
So – those are the three reasons why you should use Product Bundles as a way to help grow your online store.
Next you’re probably wondering, how do you get started with Product Bundles in your own store?
That’s usually the next question I hear from clients!
The first step is to have a think about how your customers usually buy, and how you can make that easier for them to make a decision.
Is it about reducing perceived risks to purchase and getting them to try your stuff for the first time? Put together a trial pack and then some larger packs.
Are you selling consumable products? Could you put together a volume discount for customers to buy multiples of the same?
Do you have the sorts of products where customers can be inspired, either by styling advice like Birdsnest with their styled outfits, or by different projects customers could do if they knew what they were doing and had the right stuff? Think about Bird on the Hill with their bundles of furniture paint designed to create specific projects, or Lego or Playdough with their kits to inspire kids with their creative play.
Then, you will want to use an App on your website.
A bundle needs to be one ‘product listing’, but all the items within the bundle also need to come off your inventory so that you don’t accidentally oversell anything.
We typically use the Shopify App helpfully called Bundles, which is by app developer Gazebo.
If you use a different website platform, you’ll find similar plugins or apps I’m sure.
Last thoughts…
Those of you who know me and have worked with me will not be surprised at this next suggestion.
Once you’ve set up your Bundles or value packs on your website, make sure you document this change – hopefully you’re tracking your website performance metrics somewhere, right?
You want to make sure you track your conversion rate and average order value in the weeks and months following introducing your bundles, to see what difference it makes to your business!
OK guys – so that’s what I’ve got for you today!
If you’re looking for help with your Shopify site, either designing a new site, an audit or with conversion rate optimisation, then by all means please get in contact with us. You can head to http://www.productpreneurmarketing.com if you’d like to book in for a free strategy session.
Otherwise, please make sure you join our free Rockstar Productpreneur community. I’ve got a bunch of free training materials in the group’s Units section, including one about how to design a high converting home page, so you can start learning how to improve your website results.
Just head to this podcast shownotes page, at https://www.catherinelangman.com/episode-42 and you’ll find the link to join our free community.