CPQ software helps buyers and sellers exploit product bundling as a beneficial means of increasing the value received or provided during a sales cycle.
Product bundling is often portrayed as a pricing strategy to help dump otherwise unsellable product and clear out inventory. There’s no doubt that, on occasion, this is a bundling motivation. However, in reality, the practice is much more useful and more common than one might think.
We actually buy very little in the way of one-off or à la carte products. Complex products are more often collections of options integrated together to address the specific needs of an individual customer. The solution is offered with a single price, and is perhaps even identified with a single SKU, product code or name.
Let’s take a quick look at why products are bundled from a marketing perspective.
Pure Bundling Model
In a pure-bundling model, customers must purchase two or more products together—the individual components are not available as stand-alone products. A good example of this would be men’s rack tailored suits. You get a jacket, pants and perhaps a vest all covered by a single price quote.
Joint Bundling Model
Within the pure-bundle model, this would be called a joint bundle. A single price covers the individual garments and perhaps even the alterations to size the suit to the individual buyer.
Leader Bundling
Another variety of the pure bundle is the leader bundle. A high-quality, fast-selling dress shirt may be paired with a matching tie. The bundle may be offered at a special price, or it may simply be designed to speed the selection process for the buyer and not include a discount. Either way, the strong sales performance of the dress shirt will pull along additional sales of the tie.
Mixed bundles
are similar, but they offer the added advantage of offering the sale of each product separately or by picking from a list or menu of multiple options to create a specially priced product bundle that comprises a specific number of choices.
CPQ and Product Bundling
In the world of complex products, companies offer solutions that are especially configured to address specific requirements that the customer identifies. Parts and assemblies are brought together to construct a unique product configuration that exactly aligns with customer needs.
Functional options that offer a good, better or best solution combination for customers can be built into this configuration process. This capability is more akin to the classic marketing or sales bundle discussed above.
For instance, an HVAC system for a small production facility might offer a range of functionality. The base product would at minimum heat and cool the ambient temperature within the facility to compensate for machine-generated heat, the number of people working within and seasonal requirements.
Heating and cooling might represent the “good” option, and adding some humidity control with add-on functionality might represent the “better” option. However, the “best” option of all might include those functions and also air filtration to remove a specific level of microscopic particulate matter in the air.
The pricing engine may treat the three options as three different products with three different prices or as a mix-and-match option that allows the buyer to select one, two or all three capabilities with special product-pricing advantages.
The buyer makes a value judgement and decides what addresses their needs effectively while staying within their budget.
Configuring Product Bundles: Perception Is Everything
Sales teams need to be aware that how bundles are offered affects how the buyer views them.
Buyers do not like confusion or deception, and ham handling the bundle offer can easily be perceived as both confusing and deceptive.
Positioning a deal as a “today only” option can be interpreted as an attempt to create false urgency, and in a similar fashion, throwing in something unrelated to the offered product can be seen as providing false value.
People see through arbitrary time limits, and they know that free football tickets are not going to benefit them in terms of mitigating whatever pain they are addressing with the product purchase. The ultimate effect may well be unnecessarily extending the selling cycle or perhaps even killing it.
Product bundles are most effective when they build some synergy between the individual components offered. If they don’t at least complement each other, the buyer may see the offer in a negative light. Their reaction might be confusion, deception or feeling as though there has been an attempt to divert their attention away from a weak case for the primary product.
Configure-price-quote software mitigates this perception risk by making bundling an integral function within the configuration process. There is always a credible advantage offered to the buyer in terms of the value that the bundle delivers.
CPQ-Driven Bundling Enhances Value for Customers
CPQ is a bundling utility. Some of the resulting bundle may be “required” in terms of finishing the solution, and some of it may be optional based on informed choices by the customer.
However, the CPQ-driven bundle will always deliver some level of enhanced value to the customer.
