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Getting Bundling Right

August 01, 2014 | By Lisa Singer

Many b-to-b organizations - especially those in the emerging SaaS space - are wondering how to bundle their products. A bundled offering targets specific buyers and includes a group of components that meets their needs. At a reasonable discount, it provides a good value for products that buyers are interested in purchasing together, and can increase the sale of incremental products. Rather than picking through a list of 200 SKUs, it’s much easier for buyers to choose the bundle that best represents their needs (e.g. small business bundle, startup bundle). This approach simplifies the shopping experience, as well as the rep’s selling process.

As a product portfolio strategy, bundling can be very effective as a defensive tactic to keep competitive players away from your customer base or used offensively to garner a larger share of market or wallet within the customer base.

Bundling is only effective when done correctly and under the right circumstances. Here are a few tips:

  • Don’t rush bundle creation. Bundles target specific buyers, just as individual products do. Identify which segment of your target market the bundle is intended for, and develop it based on its needs. Don’t create bundles for each buyer group based on what you think are its preferences. Conduct persona and market research, as well as product usage analytics, to validate each segment’s actual preferences. For example, it’s possible that smaller companies use the more complex features of your offering because they have less infrastructure in place. If this is the case, include those elements in the bundled offering, and be sure to offer a discount that reflects the value of bundling the components.
  • Segment the market. Segmentation should be based on the buyer’s relationship with the offering vs. by revenue. Use customer analytics and persona research to understand which types of buyers consume the offering at high, medium and low rates, and segment them based on those parameters.
  • Pricing. Ensure that the bundle-pricing scheme is in sync with standalone components, even if that includes 500+ consistently changing SKUs. When single-offering pricing changes, make sure that these modifications are reflected in the bundle.
  • Limitations. Avoid the temptation to throw everything into the bundle. Overstuffed bundles end up confusing buyers and can have the unintended effect of devaluing the components.
  • Customer focus. When creating bundles, focus on creating three to five distinct groups targeted to the customer base that generates 80 percent of the business. Organizations that target outliers end up with too many bundles and a complex pricing mess. The remaining 20 percent can be handled with a non-bundled approach.
  • Buyer testing. Finally, test the bundles with the buyers before launch. Do they make sense given their use cases? Was a critical component forgotten that renders them nonoperational?

Not all market situations are optimal for bundled offerings. For example, in a market where buyers have a high level of expertise and prefer to shop on their own for components, bundles may not be attractive. In markets where buyers tend to require a custom solution, bundles may attract buyers initially, only to be turned down in favor of a custom solution.

What are you doing in terms of bundling?  We'd like to know.

Lisa Singer

Lisa Singer is a Senior Research Director of Product Management Strategies at SiriusDecisions. Lisa has more than 20 years of international experience with global marketing and product management, with an emphasis on strategic alliance and business development. Follow Lisa on Twitter @lisagsinger.

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