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Bundling Price Strategy

The subject of the price and its strategies has been one of those that, lately, more interest I see that it has awakened, so we are going to speak of a simple strategy, one of the many explained in the material “How to set your prices”.

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The subject of the price and its strategies has been one of those that, lately, more interest I see that it has awakened, so we are going to speak of a simple strategy, one of the many explained in the material “How to set your prices”.

“Bundling” is the term in English that designates the practice of offering a group of products together.

For example we can make a “package” of three products and sell them at a certain price that is cheaper than the total cost of buying the three products separately.

It is a strategy that, from the purely economic point of view, is convenient when our variable costs are low.

WHAT IS BUNDLING USEFUL FOR?

From a strategic point of view it helps us, obviously to sell more and, in passing, to give out products that do not sell as much (putting them together in a package with products that sell much better) and increase sales of all, due to the increase of perceived value (three products seem more valuable than one).

The main issue is that these packages of products are sold better even when there are products in it that, really, the client is not going to use.

Again we find a psychological strategy, since people have an excess of confidence about the future.

It is important that we understand this, because not only will it be useful for the price issue, but to better understand many other things about the business and about ourselves.

Excess confidence in the future is a general fact that happens to almost everything. We leave things for tomorrow because we think that, even if it costs us more, tomorrow we will do it. We will begin that diet “soon” because we believe that from Monday we will have enough morale (although Monday comes and we already know what is always happening), we also get fed up today, or we do not exercise because we believe that we can compensate for that in the future, eating better in a few days or giving everything in the gym tomorrow.

But systematically these days come tomorrow, or those Monday, and it never is. The funny thing is that, even with all that experience of knowing that this never comes true, we still have the cognitive bias of having too much confidence in our capacity for what we will do in the future.

This is a lesson in Marketing and productivity in itself, but for what interests us in particular, the issue is that many people acquire expensive packages of products that later do not use.

That is why “bundling” works, as long as there is an attractive product, even if it is paired with others that will use less.

HOW TO APPLY IT

This strategy is self-explanatory, we simply group products in a package that we offer at an attractive and special price.

If we have reduced variable costs in the products (such as if we sell digital products) we can rush the profit margin and increase profits by increasing the number of gross sales.

For it to work we have to create a valuable offer, reducing the price of the package enough with respect to the price separately, especially if we include an “ugly duckling” style product that people do not usually want very much.

In fact, most successful “bundles” are made up of one or two flagship products that lead to the purchase, then there are a few decent products and a few others that are not usually as successful.

Obviously, the bigger the package and the lower the price, the better.

Some “bundles” play to “flood of value” our perception, with an endless series of products in the package that makes it difficult to value it logically, so that our brain takes the shortcut of valuing it as a good offer, because it is “a lot of product little money. “

Some “bundles” what they do is use the “for 1 euro more” tactic. That is, they offer a product and, for a ridiculous amount, such as 1 additional euro, they include another product.

This allows that the margin of the first product and the price to be asked for it can be increased (to compensate the loss that there is with the product that is offered for only one euro).

The objective of this strategy, as well as that of creating a huge package, is to alter the rational assessment mechanism of the client, making the emotion take control.

Here we get divert the attention of the main product and focus on the 1 euro, so it seems a good offer no doubt and our head begins to focus on the sound of “only for 1 euro more”, leaving the analysis of the product more blurred principal and what it costs us.

This and many other psychological price strategies are explained in the material “How to put your prices”, along with a professional automatic determination tool of prices.

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