A better way to bundle: Pricing multiple goods for increased sales

A TikToker recently posted her displeasure at price ticketing in a grocery store. The deal was ‘any 2 for $11’, but thanks to the format of the price ticket, it looked at a glance as if $11 was the price per item.

While I wholeheartedly agree, that’s not the only mistake the retailer made. Because according to new research, it could have sold more had the price been $12 rather than $11.

Here’s why.

Price divisibility

Bundle offers are a common marketing tactic to sell more products. Enticing a customer to buy a multipack, however, means you need to make the total price seem attractive. When a product is usually $6.50 and you promote a multipack of two for $11, you have to convince them that paying more on this shopping occasion to save $2 is worth the effect on their cash flow.

Thankfully, researchers have shed light on how to do this most effectively: make your price easily divisible. 

The theory is that a price that can be easily divided by the number of units — say, four for $16, three for $12 or five for $25 — is more appealing to customers than similarly priced offers, such as four for $15.95 or three for $8.

Following a number of online experiments, the researchers wanted to validate their theory that price divisibility increases propensity to buy in the real world.

Partnering with a large US auto repair shop, they ran an experiment where customers were offered a voucher for free three-packs of car fresheners. On the shelf, they were presented with three product tiers to choose from.

The lowest and highest price multipacks were listed at non-divisible prices ($8.92 and $9.04 respectively).

The middle option was promoted at $8.98 (non-divisible) on some days, and $9.00 (divisible by three) on others.

Here’s what happened.

When prices were not divisible, most people (35.7%) opted for the most expensive product followed by the cheapest (34.5%) with the middle option the least preferred (29.8%).  

But when the middle option was divisible, a whopping 50% of people chose it over the most expensive (25%) or cheapest option (25%).

Why people prefer divisible prices 

When I first read this study, I imagined the fluency with which a customer could calculate unit cost — like three units for $9 equals $3 per unit — carried over to their sense that the product itself was easy to use and therefore consume.

But ease itself wasn’t driving customer preferences.

Instead, when the price is easy to divide, it seems people shift their attention from price to the number of units. Focusing on units helps them imagine consuming the product (how many will I get through in a week?), which makes it easier for them to justify buying multiple units.

Importantly, price divisibility depends on how and whether unit prices are listed (as they often are in Australia).

In this study, the impact of price divisibility disappeared when the unit prices were included — that is, 16 boxes of tissues for $32 ($2 per box) versus $31 ($1.94 per box). 

To my mind, this comes down to how price tickets are designed. We started with the example from a local retailer that drew attention to $11 rather than the saving of $2. The unit price font was so small that it would be unlikely to pull focus from the offer.

Implications for your business

This study has a number of important implications for your business:

• Consider divisible pricing for your product bundles. Making it easier to calculate by unit will prompt your customer to focus on how much they’ll use rather than how much they’ll spend.
• Think about rounding your prices up rather than down to make them easily divisible. As the researchers state, “(you) may be able to increase sales by using higher divisible prices, without the need to offer significant discounts”. For example, a product total of $12 rather than $11.84 might be more attractive to both your customer and your bottom line.
• Get your price ticketing right. Having a great offer is one thing, but you need to direct your customer’s attention to the elements that will have the greatest positive influence on their purchase decision.

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