You might not have given it much thought, but odds are you’re part of a company’s smart bundled pricing strategy.
I know I am. I really wanted blind spot detection in my new Subaru, so I bought that option as part of a bundle that included pre-collision braking, lane sway warning and adaptive cruise control.
I couldn’t live without Microsoft Excel, and I’m glad it also comes with Word, PowerPoint and Outlook.
And though I’ve vowed to someday cut the cable cord, I’m still entangled in AT&T’s U-verse product that bundles my internet, TV and phone landline. The one bill, one price is convenient, except when the winds blows and all three services go down together. Which is a particular drama because I still have a multi-player-video-game teenager living at home.
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Bundles are a smart pricing strategy. They combine several products or services into a single package for an all-inclusive reduced price. But even though the items are sold for discounted prices, bundled products increase profits by promoting the purchase of more than one item. Which means that the cost of acquiring or servicing a customer is spread across a larger purchase.
Probably the most well-known examples of bundled pricing are the value meals offered by McDonald’s and Burger King. By combining a sandwich or chicken nuggets with a discounted price for ancillary products, McDonald’s and Burger King make it virtually impossible to resist french fries.
But with all due respect to McDonald’s and Burger King’s impressive array of value meals, the tastiest pricing bundle in South Florida can be found at Joe’s Stone Crab.
When ordered at lunch, Joe’s Classic Meal comes with three large stone crab claws, a small order of coleslaw, hashed brown potatoes, creamed spinach, as well as a slice of key lime pie, all for $49.95.
That’s still a pricey lunchtime splurge. But if you ordered each item à la carte, it’d cost $87.30, which is well beyond what most people are willing to pay for a mid-day meal, even if it’s a special occasion. By reducing the portion size and bundling some of their most well-known and popular items into an all-inclusive price, Joe’s converts a too-extravagant indulgence into an irresistible and mouth-watering bargain.
True, there are many other lower-priced entrees on the lunch menu. But by the time you add the slaw, the potatoes, the spinach and the pie, you’re more or less at or above the $49.95, so why not?
The result: Joe’s offers a compelling and easy trade-up to higher-priced lunches which increases their overall revenue, despite offering a 40 percent discount from à la carte prices.
To make Joe’s Classic Meal pricing strategy work for your business, you must see things from two perspectives: your perspective and your customers’ perspective.
From your perspective, you should create bundles that will increase your overall sales, your average sales price and your average gross margin, and that will also decrease your marketing cost per sales dollar.
From your customers’ perspective, you must create packages where the perceived value exceeds the asking price. Joe’s à la carte menu prices do a great job of creating a perception of value for the bundled offer because it’s easy to see that the items purchased separately would cost much more.
Remember: If you get the right value in front of the customer at the right price, you’re much more likely to make the sale.
And by the way, if you’re scanning Joe’s menu for a bargain, don’t overlook the fried chicken for only $6.95. It comes bundled with free parking across the street, a great dining room, professional table service from tuxedoed waiters, and it’s delicious.
Adam Snitzer is the new senior vice president of guest services and revenue management for MSC Cruises. This will be his final “Maximizing Revenue” column for Business Monday.
Recent columns by Adam Snitzer include:
Read more here: http://www.miamiherald.com/news/business/biz-monday/article130604209.html#storylink=cpy