Bundling & Unbundling In The Flower Business

Sep 29, 2014

After decades of unbundling delivery fees and service charges should retail florists consider offering bundled prices as an option?

 

If a florist offers free delivery they are using what is known as bundling – offering multiple products (in this case the flowers and the delivery service) as one combined product.

Being more specific this would probably be a case of pure bundling, meaning that the products can only be purchased together at the bundled price. In the case of mixed bundling the customer could pick and choose from the components that made up the bundle and purchase only what they wanted, meaning that they could purchase the flowers and delivery charge separately.

Even more specifically it is pure joint bundling because the products are offered for one bundled price, rather than discounting one product when it was purchased in conjunction with another.

Over the last twenty years most shops have unbundled their delivery charges – pricing the flowers and delivery charge (and sometimes service charge) separately. This was due in part to the increased cost of providing delivery and downward pressure on the retail price of flowers. When a delivery service would delivery a $50 arrangement for $3 back in the early 90s it was easy enough to bury that charge in the cost. It’s almost impossible when that same delivery now costs $10-$15, and the customer only wants to spend $40 on flowers.

Unbundling in this way lessens sticker shock when a customer calls and asks about prices. Instead of starting off with a $60 bundle that includes delivery you can start off at $45 and introduce the smaller delivery and service charges later once the customer is already invested in the purchase.

It also helps the customer understand what they are paying for, and lets them decide what is a good value. Some people won’t blink at paying for delivery because they see the value. Those that don’t realize they have the option of picking the flowers up, delivering them in person, and saving some money. It also follows in the tradition of proven old-school sales practice – get the big ticket out of the way first and resistance to smaller subsequent charges goes down.

Unbundling is, in general, a good practice and much better than pure bundling. But does that mean that there is no place for bundling?

Unbundled pricing probably appeals to more people, but that does not mean that there aren’t people that gravitate towards bundled pricing. Some people want cost-certainty – they just want to know the “bottom line”. For these people, a single price that includes all costs, is very appealing.

Think about the combos available at your local movie theater. These represent a mixed bundling approach – you can buy each component individually or together as the combo. It’s easy to assume that they offer some of kind of special volume discount, but any discount is very tiny – typically 2%-3%. But the combos are incredibly popular regardless. In fact it has been suggested that they sell well even when the bundled price is greater than the sum of the components prices.

Why? Part of it is because they spare the customer from having to think. The moviegoer knows they want popcorn, a drink, and some candy. Instead of trying to do that math in the lobby of a crowded theater they can choose a combo that fits their budget. The math has been done for them, and people will pay for the luxury of not having to think.

The same thing applies to flowers. There is a segment of your customer base that will greatly appreciate the convenience bundles provide. This is especially true during peak times like Valentine's Day and Mother's Day. Rather than go through all of the charges they will jump at the Valentine's Day special at $99.

But it only works if you also offer unbundled prices:


...a buyer’s affinity for such deals comes with a big caveat, according to new research: These groupings are often successful only if the consumer is given the option of buying the same products separately.

Dina Gerdeman in Forbes Magazine


The pure bundle approach is generally the worst. Unbundling, what most florists do now, is an improvement. Mixed bundling, which combines the best of both and is what progressive and successful flower shops are doing now, is the best approach.



Category: Examples

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