Increasing AOV with a Full-Funnel Product Bundle Strategy

When creating bundles for acquisition, gross profit per session (total cost of the sale minus the total cost to produce the good) should be your north star metric.

That's how you create enough money to pay for your acquisition costs. So, either a loss in gross margin is more than compensated by an increase in conversion rate. 

… OR, you aim not to lose much conversion rate and increase total gross margin. Either path can result in more gross profit dollars per session.

And when you mix in AOV, they become even more powerful. By increasing the average amount each customer spends per order, you not only boost immediate revenue but also improve your gross profit per session. 

This dual approach ensures that each transaction is more profitable, allowing you to cover acquisition costs more effectively and allocate resources towards further growth.

Let’s talk about where, how, and why you should be using product bundles across your marketing funnel.

First, Learn Your Bundle Categories

To start, it's essential to understand the different types of bundling options available. There are three main bundle categories:

• Multi-SKU bundling: The bundle product and its components are identified by separate SKUs during fulfillment, meaning you’ll see the bundle product and its individual components when a customer orders a bundle.
• Single-SKU bundling: The bundle product and its components are identified by only one SKU during fulfillment. When a customer orders a bundle, you'll only see the bundle product, not its individual components.
• Infinite options bundling: Infinite options bundle accepts line item properties, allowing customers to select specific bundle options without using variants on the bundle and possibly being limited by Shopify's 100 variant limit.

And two ways you can go about promoting them: 

• Exercise Choice and Control: Customers have the freedom to select products that best meet their needs, which encourages them to add more items to their bundle.
• Perceive Value: Personalized bundles give customers the exact products they want, avoiding pre-arranged combinations. This customization leads to increased spending.

To maximize the impact of these strategies, it's important to identify the right moments in the customer journey to introduce bundles. 

One of the lowest-hanging fruits? In your email campaigns and flows.

Low-Hanging Fruit Campaigns to Add Bundles To

By targeting these specific flows, you can seamlessly integrate bundles into your customer’s shopping experience:

1. Welcome Flow

• Highlight best-selling bundles to new subscribers.
• Educate new visitors on bundle offerings.
• Showcase customer reviews and benefits of using items together.
• Explain mix-and-match bundles.
• Include bundle information in multiple emails or dedicate a full email to bundles.

2. Post-Purchase Flow

• Send a thank you message and educate customers about their order.
• Request reviews and include upsell/cross-sell content with bundles.
• Estimate refill times for consumable items and promote bundles.
• Inform customers about bundles if they haven't bought them before.

3. BFCM and Holiday Campaigns

• Position bundles and kits as gift options.
• Create guides for gifting bundles to different recipients.
• Use BOGO deals to promote bundles during holidays.
• Offer bundle deals to encourage higher spending.

4. Winback and Retention Flows

• Target customers who haven't purchased recently with bundle-focused emails.
• Create new bundles to entice past customers.
• Implement build-your-own bundle tools to personalize experiences.
• Use bundles to re-engage past shoppers with fun, customizable options.

Having identified these prime opportunities to promote bundles, the next step is to ensure your strategy is well-rounded and effective. To do this, a comprehensive checklist can help you stay on track and cover all essential aspects of your bundling strategy.

A Checklist to Make Sure Your Bundling Strategy Works

1. Create a “Start Here” Bundle: Develop a "starter bundle" or a "best sellers bundle." These bundles simplify the decision-making process for new customers, making it easier for them to place their first order. Offering bundles as gift options, especially in holiday guides, can also appeal to shoppers.
2. Align Pricing with AOV and Margins: Set bundle prices at least 20-30% higher than your current AOV while maintaining healthy margins. This strategy ensures profitable sales and makes the offer appealing to customers.
3. Ensure Bundle Relevance: Bundled items should complement each other. For example, combining shampoo with conditioner or skincare products creates a logical grouping that meets customer needs and avoids confusion.
4. Find Naturally Purchased Combos: Analyze which products are frequently bought together or browsed during the same visit. Items purchased together at least 5-10% of the time can form a strong bundle offer.
5. Segment Customer Data: Use segmentation tools to identify customer preferences based on browsing history, cart additions, and purchases. Or collect zero-party data through quizzes or surveys. This lets you promote relevant bundles.
6. Provide Clear Bundle Instructions: Ensure customers understand how to select and assemble their bundle. Include clear instructions in your emails or on your website so they know how to order and what value they receive from each option.
7. Communicate the Whole Value: Highlight the overall benefits of the bundle beyond cost savings. Show how the bundled items enhance each other to provide a superior customer experience.
8. Consider Seasonal Trends: Tailor bundles to align with seasonal demands. For instance, offer sunscreen and after-sun lotion in summer or moisturizer and lip balm in winter to meet seasonal needs.
9. Streamline Bundle Operations: Use bundling software to efficiently manage inventory and fulfillment. Software like Simple Bundles breaks down bundles into individual line items, making it easier to accurately track each item's stock levels, avoid overselling, and ensure a smooth fulfillment process.
10. Allow Single-Item Returns: To improve satisfaction and maintain flexibility, allow customers to return individual items from a bundle. Bundling software can help manage these returns easily, reducing logistical challenges.

Don’t Forget to Review Profits

Having a solid strategy is vital, but it’s equally important to measure its effectiveness. Let’s crunch some numbers from a completely fake scenario to explain…

You operate a cosmetic brand that sells foundations and concealers. The foundations run at $45 (and cost you $15 to make), meaning your gross profit for your foundation is $30.

Your concealers are priced at $20 (costing $7 to make). The gross profit is $13.

Every week, you’re selling roughly 200 bottles of foundation and 50 tubes of concealer. That means your weekly gross profit for your foundation is $6,000. For your concealer, it’s $650.

After noticing your customers consistently purchase concealers and foundation, you create bundles by skin type. 

ONE bundle combines your foundation and concealer for oily skin. 
ANOTHER bundle is for the foundation and concealer for dry skin. 

Customers can purchase the bottles of the foundation and concealer for their skin type together for $65 (the total cost of buying each item separately but grouped by skin type for convenience).

For this scenario, let’s pretend your weekly purchase rate of 200 bottles of foundation stays the same (although in true Black Friday season fashion, this number would likely increase. But let’s keep things simple).

With shoppers buying the bundle instead of the items separately, you’re looking at these numbers…

• $6,000 gross profit for the foundation
• $2,600 gross profit for the concealer

That’s a 300% increase in gross profit for your concealers just by bundling products based on skin type.

With such a high increase in gross profit per session, you can safely add a $5-$10 discount on the bundle. This will make your bundle even more enticing, driving even more conversions.

**These scenarios don’t take taxes or other operational costs into account.

How to achieve the same results:

With Simple Bundles, brands can provide their customers an unparalleled level of customization and choice, making their shopping experience truly unique.

Visit us at Simple Bundles to learn more, or install Simple Bundles for FREE on the Shopify app store.