As merchants look for ways to boost revenue and cut costs, they often discover product bundling. Today, many warehouses offer kitting, bundling, and other fulfillment services to help meet the needs of direct-to-consumer (DTC) businesses. Find out what product bundling is, the types of bundling, and the advantages it offers.
Product bundling is grouping products together to sell as one unit. It’s a marketing technique to maximize profits, and it especially thrives in digital markets. In many cases, merchants sell bundled products or services at a discount. For instance, Product A may cost $50, and Product B may cost $60 individually. But if a customer buys both in a bundle, the bundle may cost $100 instead of $110. Note: The products in the bundle are sold under the same SKU.
Although you may find that many sources have conflicting definitions of kitting and bundling, they’re similar but different services. Some warehouses may consider bundling as combining multiple quantities of the same item which is limiting, but true. Whereas kitting is combining different items like inserts and gift wraps. A key distinction to remember is that kitting is often a time-saving solution. Warehouses use it to reduce time spent searching for order components. It can help reduce the time spent picking and packing.
A bundle is typically a group of complementary or similar products. For example, consider a monthly subscription box that sends people new brands of pet items. The items may be in various places in a warehouse. A team gathers the pieces for the boxes and creates a new SKU for each box unit. Another example is a bundle of a brand's skincare products that includes face wash and moisturizer.
Depending on company factors, kitted and bundled products may be sold to encourage sales or move older merchandise. Also, both may reduce the number of SKUs that need to be tracked in warehouse storage. Kitting and bundling both contribute to greater efficiency.
The type of bundling strategy a business uses often depends on the purpose. While the key reason is to drive sales, there may be a different or accompanying reason. These are the main types of product bundles and some examples of them.
A bundle tied to a promotion may include a limited-time discount for the included products. One common purpose for this type of bundling is to promote a new product. Tying a new product to a popular one can help customers discover and try the latest product. An example may be a new blend of coffee and a current best-selling blend.
Another type of promotional bundle is a BOGO bundle. When customers buy one product, they get an extra one free. It may be the same type of product, a variation of it, or a similar product. For example, a company may offer a free pair of socks when someone buys one pair.
Occasional bundling is the third type, and it may be seasonal or for special occasions. For instance, a body care retailer may offer sunscreen, lip balm, and sanitizer bundles in the summer. In the winter, it may offer bundles of items that are for dry skin.
When people buy gifts for others, they often prefer to give multiple items. This idea helps move more merchandise in one transaction. An example may be a gift set that includes a matching necklace, bracelet, and earrings.
This is another type of bundle that includes complementary products or products that are used together. It may or may not be designed to introduce and promote a new product. In a cross-sell bundle, the products may be considerably different in price. For instance, selling a blue screen filter with a computer carry bag is a cross-sell bundle.
When companies have too much dead stock, it can slow new product growth. Companies don’t typically let customers know that they’re trying to move old inventory. One creative way to do it is to bundle older or slower-moving items with popular items. Offering the two together for a discount is an effective strategy.
This concept gives customers a feeling of control and offers them value. For a company, it helps move more merchandise and may reduce multiple shipments. Customers can choose a certain quantity of items from a list to create a custom bundle. For example, an ecommerce site may offer a list of various perfume, body lotion, and body wash products. Customers can choose three of any item and vary the scents.
These are all examples of physical product bundles. Check out how virtual bundling might be better for your business.
DTC brands enjoy several benefits of working with a 3PL for product bundling. These are some of the main advantages.
One of the greatest benefits is being able to offer discounts that competitors may not. Giving customers more value for their money is a strong selling point. Additionally, it can simplify and improve the customer experience.
Dead inventory can cost more in holding expenses than the products are worth. By strategically bundling dead inventory with hot-selling items, businesses can greatly reduce inventory waste.
Customers usually have a maximum amount in mind that they are willing to pay. The difference between that and what they pay is consumer surplus. With a bundle, the goal is to offer the consumer more value while maximizing the surplus. For example, when a customer buys a product and accessories, there may be greater value. The customer may be able to use the accessories to boost the utility of the main product.
For DTC brands, the cost of acquiring customers has increased significantly in the past several years. Campaigns designed for specific products can be redundant and expensive. By marketing a bundle instead of multiple SKUs, businesses save money. Also, they can effectively market multiple products in a single campaign.
One of the strongest strategies for brand growth is optimizing margins. Using bundling to focus on larger margins and greater profits can boost growth.
Are you bogged down with the details of product bundling and wondering when to use it? Our team at Airhouse is here to help. Reach out to us to learn more about product bundling services for your DTC business.
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