Magento Bundling for profit

Running a Magento eCommerce store is very similar to running a breaks and mortar store, in terms of loss leaders. In Magento's core features is a very cool sales tool bundling.

The concept behind Bundling is to increase perceived value in the eyes of customers, create a sense of urgency, increase sales volume and minimise losses.

Increasing Perceived Value with customers through Magento's Product Bundling

This is a classic super market strategy to move more product and increase value. What you want to do is bundle some slower moving products that you were going to put on sale with some popular products. For example;

(Note: This allows for a 50% profit margin at RRP)

Example of clearance style sale: Sale Product RRP $100 on Sale 50% Discount (W/S) Gross $50 = <$0 profit

Total number of items per sale 1
Total Sale dollar volume $50
Profit $0

Example of bundle sale: Bundle
Sale Product RRP $100 on Sale 50% Discount (W/S) Gross $50
Normal Product RRP $100 no discount $100
Normal Product RRP $100 no Discount $100

Total number of items per sale 3
Total Sale dollar volume $250
Profit $100

Its pretty plain to see you boost all your key KPI indicators; Increased item volume per customer, Increased total dollar amount per customer, increased profit per custom. I like this as I am one of the few people who realises there is a finite number of potential buying users at anyone time for your site. Therefore increasing volume, profit and total dollar value is one of the best things you can do.

So the concept is sound in general retail terms, but how does an admin setup a bundle.

Unless we were your developers, your developer has likely left the bundle feature to rot.
If you are familiar with creating configurable products bundles are setup much the same. If you are not and there are no bundles setup you are in for some fun.

Let us start to configure a bundle in Magento:

Step one go to login to the admin panel and navigate to the product manager.
Now add a new product.

Select default (or previous setup attribute set Guide) atrribute set and bundle from the product type and click the continue button.

You will now be taken to the new product setup page. From here you can setup a parent or shell structure for you bundle.

This is pretty straight forward. However there are some traps if you have cut corners elsewhere in your store. Products should always be setup as individual skus that match the product. Breaking this rule can cause many issues when you are bundling.

I like to use dynamic pricing and skus, because of my rules above. Once you have filled out all the forms go to the bundle items tab. Now you can search for simple products and add them to your bundle. One of my favourite features here is being able to force users to buy in quantities. This is great if you have items that pack better in certain quantities than others. It is all about perceived value here.

For example:
If you are doing free shipping for this bundle. But you know that widget X is the same price to ship as Widget X and 2 items Widget Y then that is great chance to show better value to your users and save you shipping costs on your bottom line.

Once you have added your bundles you are good to go.

Some traps for new magento bundle players:

  • All products will need to be in stock unless you have backordering allowed turned on as well. If you do not your bundle may show as being out of stock or may exclude that item from the bundle.

  • Some frontend themes won't support the bundle layout and this may break it. So you will need to get into the theme files and edit them. Some parts of the view.phtml file/s in your theme are different for bundles.

  • Depending on your magento theme the pricing may appear confusing. Spend some extra time to get it right. The cost is well worth it.

  • If you have drop shipping or similar. Make sure your skus are being passed as your need them to the warehouse. If you want to create something like a gift basket type situation. You can add a sku for the bundle that lets your packing division know that all the child skus need to be packed a certain way, while still handling inventory as separate skus.

  • Some of the onepage checkout extensions explode when they get a bundle in them. I probably wouldn't spend too much modifying them unless you can fix it with some custom css. The preferred repair in my mind is to get an extension that works or make your own one page checkout.

    Bibliography:

    Nyuedu, Y.B. .&. .E.B. (2016). Nyuedu. Retrieved 2 April, 2016, from http://people.stern.nyu.edu/bakos/big.pdf

    Michal hroch, adam Černík, wwwtaste-prahacz, T.J.S. (2016). Wiglafjournalcom. Retrieved 2 April, 2016, from http://www.wiglafjournal.com/pricing/2008/01/price-bundling-to-profit/

    Dummiescom. (2016). Dummiescom. Retrieved 2 April, 2016, from http://www.dummies.com/how-to/content/how-to-use-pure-bundling-to-increase-profits.html

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    Senior Developer at Mebsites on the Gold Coast, Queensland, Australia. Mebsites is an acclaimed Magento and Custom Framework Web Software coding house.
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