The Fine Art of Bundling Your Services
April 30, 2015 | Contributed by: John Tabita
Bundling products and services into “packages” is a common practice across many industries, including print and digital media sales. But did you know that buyers tend to value bundles less than the individual items? It’s even worse when inexpensive items are bundled with expensive ones.
Yet, with the right pricing strategy and sales acumen, bundling has been shown to increase revenue and sales. Here’s what a 2001 – 2005 study of the Nintendo video game market found:
- When consumers had the option of buying items individually at full price or buying a discounted bundle, most would opt for the bundle. As a result, Nintendo sold more units and grew their revenue.
- However, when a bundle was the consumer’s only option, Nintendo’s revenue fell by 20 percent, and total hardware and software sales declined by millions of units.
Here’s why “pure bundling” fails. According to Robert Cialdini, author of Influence – Science and Practice:
If I want you to lend me $5, I can make the request seem smaller than it is by first asking you to lend me $10.
Likewise, your $350 bundle will seem less expensive if you first show the client that, individually, these items cost $525 than if you’d just quoted the $350.
Your $350 bundle will also seem less expensive if you present the $695 bundle first, then offer the $350 bundle once your prospect objects to the higher priced one.
That’s known as perceptual contrast.
What’s Your Client’s Magic Number?
There’s an unspoken “magic number” number that resides inside the head of every client, one that he thinks your product or service should cost. When I owned my web design business, it was $300. Unfortunately, my starting price was six times that amount. Ouch.
At first, I would answer the pricing question straightaway. Eventually it occurred to me that, if I‘m going to “sticker shock” everyone who asks, I might as well be a little smarter about it. So instead of prattling off my starting price, I’d say:
Well, it depends. One client of ours paid over $20,000 for his website.
After the shocked look dissipated, I’d follow up with, “But you probably wouldn’t need a site that extensive. Most likely $1,800 will get you a basic small business website.”
Perceptual Contrast: It’s a Double-Edged Sword
Like gravity, perceptual contrast is always at work, for good or ill. In the first scenario, other person immediately compared my $1,800 price to the $300 inside their head—and perceived mine as “a lot of money.” By leading with the $20,000 figure instead, I’ve given the other person a completely different (and higher) number to compare my price with.
Anytime you quote a price, your prospect is going to compare it to something—his rent, his insurance, his payroll, you name it. So offer a different dollar figure as a comparison, like return on investment, cost of each item individually, or a higher-priced, slightly-too-expensive package.
Which is why you should always present a higher-priced option first. Always.
Bundling is only as effective as the person selling it. If your customer sees the benefit of purchasing your products or services in a bundle rather than individually, the more likely he’ll be to buy. But it takes a skilled sales person with the right sales technique to help them draw that conclusion.