Business Techniques in Troubled Times

Product and Service Bundles: Product Strategy

by Tom Gray | on Jan 24, 2012 |  Comments

Marketing starts with standing in the customers’ shoes: feeling the customers’ needs as they feel them, and seeing your company as the customer sees you – the customer perspective.

Product Strategy: Bundled Solutions

When your customer looks at your company, does he see a laundry list of services and products, or a few product or service bundles to choose from? If he sees a laundry list, you have expressed what you can do from your perspective, not the customer perspective.  Rather than a long list of offerings, you want to anticipate the customer’s needs: offer bundles, i.e., packages of services or options planned to meet the most common sets of needs.

When creating these bundles, you realize some customers want more services and more customization than others, yet they do not want to buy more services than they need. Customers appreciate choice, but they also appreciate simplicity. They avoid complexity. So give them a few choices, but not too many.

There are two ideas here. One is offering different solutions tailored to different customer situations or needs. The second is packaging groups of services to enable convenient choice – some want the premium offer, some want a standard set of services, and other want only the basics.

Product Tiers: Good, Better, Best

This second idea is called “product tiers” or levels. As an example, think about buying a new car. The manufacturer offers a long laundry list of options, but he packages them into groups: EX may be basic, LX may be the middle ground, and SX may be the premium package. In an Olympic year, you might think of them like the three Olympic medals:  bronze, silver and gold. You choose one package for a single price, and then maybe add one or two other a la carte options for a separate additional fee to customize the product to meet your needs.

For example, a photographer may offer wedding photos, graduation photos, family portraits, event photos, and videos for all these as well. In each of these situations, there may be multiple photo sessions, different photo and video editing options, and a variety of media options from proofs to albums to disks. This is the laundry list. How does he or she structure the website or brochure to simplify the complexity?

Presenting Product Tiers on the Website

The home page might list the types of situations matching the most common customer needs: wedding, graduation, family portrait, and events, with a link to a page for each.

On each “customer situation” page, he offers three product tiers: basic, standard, and premium, using “catchier” names. He presents the tiers in a table, with a column for each level of package (tier) and a column on the left for services. There is a row for each type of service: sessions, proofs, editing, and delivery format. Under each of the tier headings, he enters either an X (if it is provided), or a number (e.g. number of proofs), or types of editing services available in this tier, or leaves it blank if that service is not available in this tier. At the bottom, he provides a link to an “a la carte” services page, where the customer can add a specific service for a specific fee.

This “a la carte services” page can be set up as a table as well, with a row for each service showing the name, a brief description, the standalone price, and a column for “included in package”. This entry in this last column would show the name of the packages or tiers that include this service in the package price. For an example, see Web Hosting | Secure Hosting Plans with Unlimited Bandwidth.

Customers can go to the page that matches their situation, select the package that fits their need and price range, and then go to the “Services” page to add customization. They have a choice, and the choice is simple, yet can be tailored.

Result: Higher Sales

Customers often decide to upgrade to a package with more services when those who thought they wanted only basic services can easily see what they are missing. Product tiering thus becomes a sales tool!

For more on this product/pricing tool, and a description of how this “decoy effect” leads most to choose a higher level bundle, see Pricing Technique: Good, Better, Best | Thomas H. Gray – Consultant, CEO, Director.

Does your product strategy start with the customer perspective? Do you offer product tiers, service bundles based on common needs?

Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), a Certified Business Development Advisor, and a Certified SCORE Mentor. He can be reached at 630-512-0406 or tgray@tom-gray.com. See www.tom-gray.com.

 

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Comments

  1. Omar says:

    Thanks for emphasizing Brad’s entry on ceo’s being cmotitmed to the product, George. The success of most innovative internet/technology companies is predicated on developing and evolving a winning product/service equation. The person most accountable for achieving that goal .is the CEO. Not the VP Product Mgmt. Not the head of Marketing. Vision-thing CEOs that don’t get into the details don’t belong in the startup world. In my opinion, they don’t belong in the corporate world. More Steve Jobs’s, More Bob Igers. Less Ken Lays. Less Dick Fulds. The product is the principal responsibility of the CEO and he/she needs to hear from customers, product managers, developers, designers, salespeople etc to assess his product’s fit to the current and future market. He/she really needs to listen and understand not just nod acting like they are listening. You will be successful not in spite of your customers but because you have successfully navigated product/service fit with your customers and the current/future state of your market.