2. Bundling 2.0 I Going Beyond Boundaries
Traditional bundling is a nice start for companies seeking to drive acquisition,
generate cross-sales and increase product & service uptake / upsell, but it’s only
a start – bundling beyond boundaries is the wave of the future.
Traditional bundling (the concept of putting complementary products & services
together and selling them as a package to the customer base) has been around
for ages, utilized by companies across almost every sector. Examples of
traditional bundling can be found in ICT (Microsoft Office, a bundle of different
software), among restaurants (McDonald’s Extra Value Meal, a bundle of a
burger, fries, and drink), and in telecom (AT&T, offering various bundles of
internet, home phone, wireless & digital satellite services).
The word traditional in this case refers to the fact that bundles have usually been
created by one company, within one sector, as in the examples above. A given
company has traditionally looked within its own product and service portfolio to
design the bundles we as consumers ultimately see. But there exists a wealth of
opportunities to look beyond just one’s own offerings to create bundles which
can generate significant value for the company and be truly appealing for the
consumer. This concept, bundling 2.0, is the wave of the future.
What is Bundling 2.0?
Bundling 2.0 is the concept of a company looking beyond itself when considering
what bundles it can offer its customer base. It’s the idea that many different
products and services from within and outside a sector naturally belong
together, and can be offered together to potential customers. Such bundles
require some form of partnership with another firm, and thus, require more
legwork to go-to-market.
The benefits these new 2.0 bundles provide customers are not just savings,
which is the core value proposition of traditional bundles, but rather ease,
making a customer’s purchasing experience extremely convenient. 2.0 bundles
are designed around the purchasing behavior of consumers (particularly around
frequency and volume) and take into account the segment they belong to. As
such, 2.0 bundles are designed with extensive business intelligence serving as
input.
2.0 bundles can be designed with partners both within and outside of one’s
own given sector:
Across Sectors 2.0 bundles across sectors are essentially no different than
those within a sector, except that the bundles products and services come from
an array of companies that at first glance may not always seem to relate to one
another. There are very few examples of such bundles in the marketplace today
– one that does stand out is in the restaurant / entertainment industry, whereby
a customer who eats at a certain restaurant in a given mall and has a bill over a
certain amount receives free movie tickets to a cinema in the same mall. As the
two events (dinner, then a movie) naturally go together, the bundle makes a
great deal of sense for all parties involved. Again, the opportunities to create
3. bundles that can generate significant value for the companies offering them are
endless.
Some examples that come to mind:
o Banking & Telecom & Others: A bank teaming up with a telecom, utilities
providers, an accounting agency, an office supply company, and a courier
company to offer a bundle of products and services that almost any start-up
company would need. Aside from any discount that can be provided, the value
delivered through the offering of one-stop shopping is almost immeasurable.
o Real Estate & Housekeeping & Others: A real estate rental agency teaming
up with a housekeeping service to offer a bundle on rental properties, such
that the potential consumer not only receives a discount from procuring the
offerings together, but also benefits from the convenience of the single offer /
one-stop shopping. Other partners in such a model could include a major
appliance chain, a gardening company, a water delivery company, a moving
company, or even a utility provider.
o Insurance & Fitness: A health insurance company teaming up with a gym to
offer a “Health Plus” bundle, whereby the insurance premium is discounted for
those who sign up for the gym membership and commit to a certain number of
visits during the policy’s lifetime (as the risk of the insured decreases
significantly, taken as a whole).
o Automotive & Energy: An automobile dealer teaming up with a chain of gas
stations, whereby customers who lease a given car receive a discount on
gasoline for the length of the lease.
Within Sectors 2.0 bundles within a sector aim to bundle a group of products
and services that naturally complement each other, though not always offered
exclusively by one company. Some examples of such bundles already exist – i.e.
in the telecom sector, whereby a customer who signs up for a mobile phone
service receives a branded mobile phone at a discounted price, or, in the ICT
sector, whereby a customer who buys a laptop receives a bundled software for
free – but these only scratch the surface of possibilities still out there in various
sectors.
Some examples that come to mind:
o Electronics Stores: An electronics store bundling together a set of goods that
naturally go together, thus increasing share of wallet (though reducing
margins) – a specific example of this could be a “New Home Bundle,” bundling
a given television, DVD player, music system, home telephones, etc., together
at a discounted price (done independent of the brands, who together would
likely not bundle their products together).
o Supermarkets: A grocery store bundling together a set of perishables that
also naturally go together – a specific example of this could be a “Dinner for
Two Bundle,” bundling steaks, potatoes, vegetables, dessert and a bottle of
wine, together at a discounted price. Such a bundle not only provides
4. convenience for the shopper who can pick the bundle up when on the run, but
also helps increase average spend per basket (as customers may not normally
buy all components of the bundle if not for the offer).
o Furniture Stores: A furniture store bundling together a set of furniture that
every new business opening an office may need, thus increasing share of
wallet, by bundling together things like desks, chairs, shelves, etc.
As is evident from the examples above, this type of “within sector” bundling
works primarily in retail, whereby retailers are able to bundle complementary
products with each other. Other applicable retail types where bundling can be
leveraged include clothing, hardware, bookstores, etc.
Rules & Guidelines to Follow When Designing Bundles
We recommend a set of rules & guidelines be followed when designing 2.0
bundles to ensure maximum effectiveness and uptake of the offerings. Poorly
designed bundles will add little to no value to companies that offer them, and in
fact, may harm the bottom line through a decrease in margins with no shift up in
revenues.
1. Always begin a bundling design effort by gaining a deep understanding of
your customers and their purchasing behaviors. Every company has its own set
of unique customers that naturally cluster into identifiable and addressable
segments. These segments each have different needs and behave quite
differently from one another. When designing bundles, it is critical to know
your customer segments and address their specific needs. Questions that need
to be answered here are around the products and services customers in each
segment buy, the order they buy them in, where they buy them from, etc.
Of particular importance is to understand the important life-stages of
customers in each segment. For example, young adults will sooner or later rent
or buy their own home, a stage in their lives that many companies stand to
benefit from. Businesses, as another example, will open new offices, a stage in
their growth that requires significant purchases to be made. Focus groups,
surveys, and an analysis of internal data are some of the ways in which such
information can be obtained.
2. By understanding the purchases made by consumers in each segment,
companies then need to identify their shortcomings in terms of offerings, and
look to close those through partnerships. For example, a business about to
open is in need of an office to rent, a new bank account / loan, telecom
services, an accountant, office supplies, etc. Any of the aforementioned
entities can take the lead role in trying to offer a one-stop shopping experience
to the potential customer by forming partnerships with the others, and
offering a bundled package to meet most of the new businesses needs. Each
partner would offer some level of discounts and / or benefits to the potential
customer, who would potentially even pay a premium for such a convenient
service, if it existed.
5. 3. Partner with companies that are positioned in a similar light to yours. The
products and services in a given 2.0 bundle should be aligned with each other
in terms of their brand value, as the end user needs to perceive all components
of the bundle as attractive. As such, a product that is perceived as low price /
high value should be bundled with others that are also perceived similarly. A
poor selection of partner products and services can also cause a detriment to
customer perception of your own brand, as any failure of the bundle to satisfy
the end user will reflect on all partners. Thus, partner selection is a very critical
component of any 2.0 bundling design effort.
4. Conduct a basket analysis to understand which products naturally go
together. By identifying the products and services that are commonly
purchased together by customers at the same time, companies can identify the
possible variant bundles they can create. For example, if a given product is
purchased 20% of the time when a specific other product is purchased, then
bundling these together could push that rate up, incentivizing customers by
not only reminding them of the complementary nature of the products, but
through some form of discount.
5. Thoroughly pilot all bundles. The importance of this cannot be stressed
enough, as piloting provides a great deal of insight into how effective the 2.0
bundle will be when rolled out in mass scale. Pilots provide marketing and
sales the opportunity to understand the potential performance of the bundle,
the resistance there may be to the bundle, the processes that need to be
redesigned, the value proposition that needs to be revisited. No 2.0 bundle
should be rolled out fully until pilot results are obtained and possible tweaks
are made to the final offer.
2.0 bundles stand to provide a wealth of benefits to not only end users, but the
companies that engage in designing and offering them. We recommend all
companies immediately begin examining the ways in which they can benefit
from such a concept, and move forward in ensuring such bundles hit the market
sooner rather than later.
6. About Forte Consultancy Group
Forte Consultancy Group delivers fact-based solutions, balancing short and long term
impact as well as benefits for stakeholders. Forte Consultancy Group provides a variety
of service offerings for numerous sectors, approached in three general phases -
intelligence, design, and implementation.
For more information, please contact
info@forteconsultancy.com
Forte Consultancy Group | Istanbul Office
www.forteconsultancy.com
