Product bundling is a powerful retail strategy. Offering complementary products as a bundle can provide customers with more value, boost sales of lagging products, and drive revenue.
But there’s an art to bundling products successfully—and data can help. Keep reading to learn how to leverage data and analytics to create strategic product bundles your customers will love.
Using Data to Create Product Bundles
If you’re looking to offer product bundles, the first question is, which products should you package together?
For optimal results, it’s essential to build bundles based on actual customer purchasing behavior—not random guesswork. Data, and ideally visualizations, can help you build and test ones that have the best chance of converting.
Some product bundles may seem obvious, like pairing a shirt with a suit and tie, or a cocktail starter set. But still, you shouldn’t make assumptions. Even for seemingly intuitive bundles, it’s worth conducting a thorough analysis to ensure you’re seeing the whole picture and not missing any opportunities.
By adopting a data-driven approach, you can create more targeted and appealing bundles that meet customer needs and drive business performance.
Data-Driven Strategies to Build and Test Product Bundling
Strategy 1: Product Affinity Analysis
Which products do your customers like to buy at the same time? And which items do they buy consecutively? If you’re not sure, product affinity analysis is about to become your new best friend.
To ensure your bundling is effective and have an incremental impact on your average order value, you need to understand what your customers are putting in the same cart, and what they typically buy in sequence (in their first and second purchases).
The best way to figure that out is with a product affinity chart, like this one from Daasity:
The different flows from one side to another show you which items customers commonly purchase together.
These can be highlighted to hone on particular purchase paths…
And you can dig deeper into the data (at the SKU level) to see the actual frequency of products ordered within the same purchase:
You can also offer bundles with the items that they likely would have bought in their second purchase, resulting in one larger order rather than two. This saves you costs on shipping and handling, gets you a larger order upfront, and is more convenient for the customer. This is particularly valuable when offering low gross margin products or products with a very high inventory level.
Strategy 2: Bundling Based on Gross Margin
Gross margin is simply net sales minus SKU costs, such as the costs of production, raw materials, and any other associated business costs.
This key profitability metric can help you understand which products are most profitable, and which ones are dragging down the bottom line. You can also use this information to optimize bundling decisions.
To get started, calculate the number of sales and gross margin for each SKU, then split them into four key categories:
- Low sales & low margin
- High sales & low margin
- Low sales & high margin
- High sales & high margin
You can either calculate this manually (or let Daasity handle the heavy lifting for you). High sales products are positioned higher on the Y-axis, and high-margin products have a larger bubble size:
Once you understand the popularity and profitability of your products, there are many ways you can optimize product bundles accordingly:
- Pair high sales, low margin products with more profitable products.
Popular products that cost a lot to make in relation to their sales price aren’t great in terms of profitability. By bundling them with products that have a higher margin, you can leverage their popularity, counter-balance the low margin, and increase overall sales.
- Pair high margin, low sales products with more popular products.
High margin, low sales products are a key opportunity. Your brand makes a decent profit every time someone buys them, but the problem is, they aren’t purchased frequently enough. Offering them as an add-on to more popular products is a great way to increase their sales and therefore overall revenue.
Strategy 3: Testing Bundles Based on Single SKU Carts
Products that are frequently purchased as standalone items might be more profitable if you offer them as a bundle or as part of a subscription. Perform a single SKU analysis, like this one from Daasity:
Once you know which products are frequently purchased individually, you can cross-reference this data with your gross margin analysis above. Specifically, brands should look for products with a combination of low gross margin per unit, high sales volume, and a significant number of single SKU purchases.
This will help identify which products may benefit from being included in a bundle, have their prices adjusted, or even be removed from the product assortment altogether. For example, products with low gross margin and high sales volume that are not suitable for bundling could potentially be candidates for price adjustments to improve profitability.
Better Product Bundling With Daasity
When it comes to product bundling, relying on guesswork will leave money on the table. That’s why many of the world’s largest consumer brands rely on Daasity to ensure their eCommerce and retail strategies are data-driven and effective.
By analyzing which items are most commonly purchased together, and understanding the popularity and profitability of different products, brands can create targeted product bundles that enhance the customer experience, drive sales, and maximize profitability. You can do all that and more with Daasity.
Daasity breaks down products affinity and gross margin into easy charts so you can see at a glance how your products are performing. By consolidating data from eCommerce/DTC, Amazon, retail, and wholesale channels into a single and unified view, we enable consumer brands to centralize, analyze, and report on the performance of all their channels and SKUs.
Interested in learning more about Daasity and how we can help you do more with your data? Learn more on our merchandising page.
Or, if you'd like to keep reading, here are a few more articles to help guide your product and eCommerce strategies: