Creating more bang for the buck

The retail marketing scenario is evolving fast! With more and more brands jostling to give add on values to their target group of customers, the marketing strategy is bound to add some novelty and work smarter. Bundling creates differentiation, greater value thus enhancing the offering to the customer. Bundling is based on the idea that consumer values the grouped package more than an individual item.

Bundling can enhance an organisation’s offering while minimising the cost. This is attractive to consumers who will benefit from value-oriented purchase along with complementary offerings. It can also encourage customers to look into one single source for several solutions. Before bundling two or more products together in a promotional offer one must select products with some common characteristics that will be beneficial to that target group of customers. For example, retail brand Croma has tied up with Acer while promoting back to school offer. Likewise, Bata launched a few sporty school shoes recently and with that they provide free goodies from Ben Ten, a popular character on Cartoon Network.

TYPES OF PRODUCT BUNDLING

The variety of bundling strategies is almost endless. These include offering:

a) “more of the same”, for example, buy three, get one free; b) Bundling a product with a complementary item, for example, free film with the purchase of a camera.

c) Offering something totally unrelated, for example, a chance to win a Hawaiian vacation with the purchase of a microwave; d) Offering discounted pricing when customers purchase several different products at the same time, termed bundle pricing. The technique is used to sell products that are complementary to a main product. Also, there is bundling products with donations to charity, for example, a percentage of the price of this product will be contributed to the World Wildlife Fund and bundling transactions together, like trading in an old car for a new one.

BUNDLING FOR RETAILER

Retailers are the so-called gatekeepers of bundling. A firm may offer bundled discounts if its customers demand them. For example, some consumers may demand value meals that include a sandwich, soft drink and french fries. A firm may realise cost savings by selling bundles of products that could not be realised from single product sales. Product bundling brings some exciting benefits for retailer as well as its target customers. A customer gets more value to their money, while a retailer gets a chance to clear his inventory with a fair amount of profit. For retailer, bundling of products/service offerings can be a great way to:

• Create a new market for an existing product in combination with a new product.
• Clear inventory of current versions in preparation for new versions of products.
• Extend the life of one or more flagging products.

FOR FMCG

Bundling of products gives more bangs for the buck to a FMCG company when approaching a new market. By selling bundles of products to retailers a manufacturer may realise economies of scope in distribution and contracting. These savings are then passed on to consumers as bundled discounts. The activity not only lessens the distribution cost for a FMCG company but also proves beneficial to them to explore newer geographies without worrying too much about the profitability.

Mr Sameer Satpati, Head-Marketing, Marico, explains, “A well-designed offer recruits new users, increases penetration, increases brand recall, increases consumption, enhances brand loyalty and creates significant differentiation in the market place vis a vis competition”.

MODE OF ADVERTISEMENT

While launching a product bundling, it is imperative to focus on the designing of the bundling products. As for retailer, it is the Below the Line (BTL) advertising and for FMCG it’s the Above the Line (ATL) advertising. The reason here is that when a retailer gives bundle products, he should concentrate on the local surrounding of the store and for this leaflet, flyers will be the right medium to advertise. Likewise, when an FMCG product gives bundles, they do it on large scale basis to promote a particular brand and for which they choose Television, Print media to circulate the message.  

COST FACTOR

As informed by Mr Peshwa Acharaya, Head-VP & Chief-Marketing and Consumer Experience, Reliance Retail Ltd, “There are two types of investments involved in a bundling of products in a promotional offer. One type of investment should be on the execution of bundling and another type of investment should be on its advertisement. The investment depends on the margin of the product; if it’s a less margin product then the investment would be low and vice versa. This investment is done jointly by the retailer and by the manufacturer”. 

WHO DECIDES TO GIVE BUNDLING OFFERS?

Largely speaking, it is a decision from the merchant house and not the manufacturer’s decision. But in special cases, the FMCG companies also take decision to choose the products to be bundled. If the manufacturing company itself wants to launch a brand promotion then the decision comes from the FMCG company. Ms Smeeta Neogi, Head-Marketing, Westside informs, “Since Westside is a private label format the offers and product bundling on this is decided internally by us”.

SAME BRAND OR ACROSS BRANDS

Choosing same brands, same products or different products, different brands is typically dependent on the company’s objective of launching this promotional offer. Mr Acharaya reasons, “We launch both types of bundling like multilevel promotions and across brands. Multilevel promotion is giving the same product extra by increasing the number of products, and one gets a home theatre from Sony free while purchasing one LCD TV from Samsung is across brands bundling”. 

SPECIFIC TIME TO LAUNCH

Product bundling is purely seasonal. When combining two products together some time the company looks if the free items are suitable for the time of the year. If it’s summer, retailer can bundle deodorant with soap. Also, bundling promotions are the best suited during festive season.

During this trying time when consumers are a bit cautious on spending their disposable income on high end products but they can not curtail their consumption on mass products. Also bundling products ensures “save more” while you “buy more” options to its customer. Retailer and FMCG Company can en-cash the strategy through bundling mass products and reap multiple benefits.