Stop Discounting! Create Value Bundles Instead

Stop Discounting! Create Value Bundles Instead

Value Bundles

 

Something for nothing… don’t we all love that? But too often, when you lower your price, you get almost nothing for something. Instead of discounting your prices, create value bundles instead. What is “value bundling”? A value bundle groups related products together and sets one price for the combination. This works best if the grouped products have a logical association with one another. Customers tend to assign value to a bundle based upon the probable cost of individual “pieces.” Value-bundling is a powerful method if the price of your value bundle equals the price of the most expensive component. They feel they’re getting a “deal.”

Here’s a quick example on the difference between value bundling and discounting. Let’s look at Restaurant A and Restaurant B. Both are trying to increase sales so they decide to run a 2-for-1 special.  Their typical meal on the menu is $20, and the cost to the restaurant is $12. Restaurant A decides to run a discount one week – 2-meals-for-$30, reducing their price of each meal by $5. Restaurant B decides to offer their 2-for-1 deal at $40 but creates a value-bundle adding a Free bottle of wine with each 2-for-1 meal purchased for one week. The bottle of wine costs the restaurant $6 each ($3 for each meal).

So Restaurant A’s cost is still $12 per meal, so at $30, their profit on each meal sold is $6. Restaurant B’s cost is increased to $15 per meal, and their profit on each meal is $10. But that’s not all. The next time diners come to Restaurant A, they are going to expect to pay $30 for a meal – they are actually “training” their patrons to look for a discount. Diners going to Restaurant B will have a perception that their meals have more value and will expect to pay $40.

So the value bundle is actually more profitable while also having a higher perceived value. ​​​​​​​Just something to consider.

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