A Bundle of Joy or Two Rocks Tied Together?

by: Doug Michaelides

The “family pack” is a time-honored retail tradition.  A per-unit price break is offered to encourage the customer to buy several units at once.  The retailer sells more stuff while preserving the price point of the individual item.

A more complex commercial strategy used by B2B marketers with extensive product lines is to bundle complementary products together.  Bigger companies do this to increase order sizes and de-position smaller, single-product competitors.  Ideally, reduced selling costs offset any bundle discount.

On the surface, multi-product bundles appear to have two primary customer value propositions:  convenience and price.   Unfortunately, these are neither particularly compelling nor sustainable.

Consider a company that sells equipment to radio stations.  From their portfolio, with careful selection, a client can outfit an entire studio from scratch. A marketer might get the bright idea to create a cheaper and easier  “radio station studio bundle” to increase market share and improve inventory planning.

But a competent radio station engineer takes pride in choosing the right equipment.  Buying equipment is like buying power tools – it’s fun!  They brag about the deals they negotiate.  The bundle takes all this away.  The marketer has inadvertently subverted the position of the buyer.  Soon, repeated requests for substitutions by picky engineers slow the sales process and undermine the bundle.  Competitors create their own bundles.  Now everyone’s frustrated and the vendors are selling at lower margins. Oops.

But wait!  For a radio station in a small town or university that lacks experienced staff, a pre-engineered “station in a box” could be quite attractive. The primary value proposition isn’t convenience or reduced price; it is confidence and time-to-operation.  The bundle is a solution for an entirely new market segment:  inexperienced radio station operators.

The most successful bundles offer a solution that the individual products can’t on their own – not just convenience and price.  Creating a true solution bundle is like secretly inventing an entirely new product that targets new market sectors with a compelling value proposition.  Market it accordingly.

A final word to wise bundlers:  While a strong product can pull through average products, it’s pointless to bundle together mediocre products with a big price break hoping they’ll fly off the shelf.  Everyone, especially your customers, knows that two rocks tied together still don’t float.

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