Learning to love Retail Un-Bundling
In the last ten years, retailers have had something of a change of heart when it comes to product bundling. Traditionally, bundling was about offering multi-buys that reduce the price of a bestseller, but only when purchased with one or more other items. The goal, of course, was to increase the basket size, and grow revenue. More recently though, retailers have been breaking up bundles - aiming to drive volume through encouraging impulse purchase. For example, paying 99p for an iTunes song you love can feel better value than £7.99 for an additional half an album of tracks you don’t care about….even though the price per track is higher. If it feels good value, consumers won’t think twice about buying more often. The consumer mindset feels a sense of control and freedom – that they can cherry-pick the things they like, the actual items they want to buy, rather than what others want to sell.
But doesn’t that mean sellers get less revenue if they allow shoppers access to the good stuff without swallowing the rest?
Great retailing is about listening and interpreting what customers want, not forcing pack sizes on them against their will.
For many subscription-based services, customers dislike the loss of freedom when required to tie into a contract. Pay-As-You-Go phones may cost more per minute to use, but for certain customer segments and sometime whole national cultures, it’s the ‘natural’, more controllable way to use airtime.
Similarly, mobile providers are smart in offering 24-hour 3G passes for the iPad, knowing that this will encourage trial usage, and that many users will graduate to the 30-day (no commitment) contract in time.
Trial sizes have been used in product launches for decades. They enable retailers to offer fresh products to consumers, whilst reducing their risk of trying a new item. Manufacturers gain too, as they can discover and then introduce larger pack sizes of the most popular varieties at a later date. The same mini-versions can also be re-marketed as ‘travel-size’, so serving a different customer segment and need. (Hey, and don’t forget they make a fantastic giveaway to loyal or high-value customers, whilst keeping costs down too)
Retailers and manufacturers have learned to answer a simple set of questions to drive success:
- which features, benefits, flavours or variants are loved most, and why?
- what stops customers buying or accessing these favourites more often?
- to what degree can infrequency-of-purchase be overcome by unbundling?
- how can pricing strategy be adjusted to profit from smaller, more frequent purchase behaviour?
- what incentives can be offered to customers towards ‘self-bundling’ (freedom to bundle their own items rather than being forced to)?
Whatever industry you’re in, it’s worth asking yourself how your business could beat its competition by making leading goods and services more accessible.
The challenge starts with truly understanding what makes those products so desirable and beneficial in the first place, ensuring that your insight is up-to-date and innovatively applied in the business.
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