How To Achieve Higher Prices Through Bundling

A big question on many business owners minds is “How do I increase my prices and not loose customers?” It’s scary to think about loosing customers …erk… and having that horrible feeling of decreasing revenue and business going backwards. 

One of the strategies I love to use is known as ‘Bundling’. The concept is a simple one. It’s all about putting certain products together as a package and then selling them. 

The power in doing this is that the complaint about price is removed. And that’s because a product from one business can’t be compared with the same product from another business. Because it’s bundled with another product it’s difficult for the customer to work out the pricing. All they see is the value.  

Unfortunately most small businesses don’t have a strong value proposition. This causes price to be the only thing for customers to compare. 

Successful marketing is all about offering more value than any of your competition. Potential customers are not shopping on price – they are actually shopping for value. And they’ll pay more than twice the price if they feel they get much more value. 

Most businesses don’t understand this concept and they consistently keep going down the road of discounts and price slashing to get customers in. Unfortunately this destroys their margins and causes cashflow issues in their business. Did you know that when some businesses discount their price by a simple 10% they have to sell 50% more to get back to their original position? 

For example, let’s say your widget is $100. And you have a 30% profit margin. That means you make $30 for every widget. If you reduce the price by 10% it sells for $90 and your profit is now $20. 

To make $1000 in profit at the original $100 means you need to sell 33.3 widgets (33.3 x 30). 

Now, if you discount to $90, you need to sell 50 widgets to get $1000 profit (50 x 20).

This means they need to sell 50% more widgets! (33.3 x 1.5 = 50).  

Now have a think about this: When did you last see a 10% discount sign? It’s pretty rare and if we see it we usually don’t take any notice. Most businesses know they have to discount by 20% – 40% to make an impact. 

So, what is this telling us and why is this so important?

Well, research says that price is actually one of the LAST things that impacts the buying decision – unless the discount is 40% or more!  

Here’s one of the big secrets to growing your business. 

GET AWAY FROM DISCOUNTING!!!  

Do this through creating INNOVATIVE solutions that separate your business from your competition. And that can involve increasing your price. 

Through bundling you can increase the perceived value and this causes a potential customer to purchase more.  

For example, let’s look at a home builder. They’ll work with suppliers who provide them with a discount for purchasing a large volume of material. 

The builder understood that as he was constructing the home it would be easier for him to install home entertainment systems, security systems, fire protection and monitoring systems. Normally this happens after the house is built and the home owner gets charged a considerable amount for the labour to install it. 

To get this installed, the retail price for this type of package was $30,000. However, this smart builder knew that he could purchase the systems in bulk at $6,500 each and it would be much easier for his team to install as the house was in construction. 

His building business is building homes in the $400,000 price range and there’s a bit of competition in that price range too. 

 So, he differentiates his business by offering a $406,500 home that comes complete with a FREE $30,000 entertainment and security system! 

Personally, I’d be taking a serious look at what this builder is offering. Wouldn’t you? 

Does it make you think that it’s a MUCH better deal than the homes without the system? 

This could allow the builder to generate a much higher sales volume each year and a much higher overall profit. 

A builder who specialises in home renovation could also use this type of differentiation for every job they quote. 

Can you see the power of this yet? 

The builder discovered what else the customers wanted and then created the partnership with the electronics company and included this in his package. It wasn’t something he normally dealt with and it wasn’t something they normally offered.  But they discovered that it was a problem their customer had and didn’t have a solution for. 

What are the potential products or services that you could offer your customers? This strategy can add a significant amount of revenue for your business. Commonly we find by as much as 25% – 40%. Is it fair to say that you could lift your revenue by a simple 10% if you implemented this strategy? 

And so how does that look for your revenue figures?  

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