The Unique Value of Product Bundling

Dan Blechner  |  
February 3, 2020

Many of us think of bundle purchases in the context of cable television, mobile and internet packages. But whenever a customer purchases a brand offering of several products packaged together, it’s a bundle purchase, even if the products aren't packaged together or offered under an official promotion. In fact, bundle purchases already happen today for a large variety of products, and can be offered by a variety of global brands.

Many of us also think of bundle purchases in the traditional sense. But when you tie bundles to retail data, you have a whole new area to explore, build, and leverage. 

Why are bundle purchases important for brands?  

The number one reason bundles are important is they provide significantly higher monetary value, usually by two to three times. That is, for the same customer acquisition cost, the transaction value is doubled or quadrupled, increasing the net gross margin with an even higher multiple.

But more importantly, a bundle purchase creates an opportunity for brands to use different pricing and engagement strategies. The brand can keep the official product price but unlock a new offer with bundling, whether it’s a valuable gift that further connects a customer to a brand, or whether it’s a discount. And because bundling can be provided through unique offers, the offers then can be customized based on the region and store type, allowing brands more opportunities for engagement and flexibility. 

How can global brands who sell through distributors use their bundling power?

Before the digital era, global brands could only promote a single combination offer at best, due to communication and data synchronization challenges with third-party retailers. Brands would not have been able to monitor if the third-party retailer in fact provided the discount or gift following a purchase made by separate customers or by a single customer, a vulnerability they could not afford. Moreover, a sale through a distributor wouldn’t feed data back to the brand, which would prevent any marketing optimization. Even if a brand received full sales data from retailers, that data wouldn’t be granular enough to show which products were purchased in combination. Each sale would be divided by a date, and none would have customer information. (Most times, in fact, the retailer wouldn’t have customer information, either.)

So what has changed?  

There’s a new solution on the market that allows brands to harness the power of this data. The Connected Commerce platform is provided through a new product warranty that is activated at the point of sale by the retailer. Each purchase is recorded with date and product details (customers are not required to provide their personal information), which is then shared between the brand and retailer. Volleto allows a brand to require retailers to activate the warranty, at the time of sale, without imposing on the customer. The Connected Commerce platform provides the space for much-needed digital communication between brands and retailers at the point-of-sale (through their interface in the system), as well as the enforcement needed to ensure compliance. 

In the case of bundling, Volleto’s platform provides an option for joint activation of all products purchased as part of a bundle by the same customer. Retailers can mark bundle sales, thus enabling the accurate collection of bundle-purchase data. The brand and any other business entity involved in the distribution then receives this data in real time, allowing them to make any needed adjustments immediately. Brands can now increase their market leverage, for example, by adapting their marketing strategies and improving their sell-in / sales predictions. And the more brands have access to bundling data, the more value they can provide to customers who purchase these packages. When combined with the other customer insights Volleto provides, brands can greatly improve their ability to make their customers happy. 

So the value to brands and customers is clear.

But what’s in it for the retailers and distributors?

The answer is simple: An increase in revenues. Bundle purchases already happen today for a variety of products and brands, even without special incentives in place. Creating more bundles creates new opportunities for retailers and distributors to increase revenues: while the cost of customer acquisition, cost of sale, and cost of service remain the same -- no additional investment is required on their end -- the transaction value with a bundle is two or three times greater than the value of a standard purchase, and the net operating income (when calculated per transaction) is even higher.

That’s a win-win situation that can -- and should -- be implemented by any forward-thinking brand.

*1 Net Gross Margin calculated as Transaction Value minus Cost of Goods minus Cost of Customer Acquisition.