Dollars & Sense

Subscription Bundles

Recently, when booking a trip to Florida to see family, I was shown an array of bundles by American Airlines. There was the basic flight, and then:

• Main Cabin Plus. Included a free checked bag, a more spacious seat, and boarding earlier. 
• Main Cabin Select. Included an even earlier boarding time and made it easier to change my flight. 
• First Class. Included the largest, most comfortable seat, priority boarding, two checked bags, and better drinks and food. 

The Wall St. Journal shares that what I experienced is happening across the airline industry. Airlines, from American Airlines to Frontier, are offering more and more glitzy options and then gatekeeping them in bundles. A recent United Airlines survey showed that customers want higher-tier items, such as premium pajamas, more premium meals, and even a button “press for champagne.”  When an airline limits this option to only those that buy First Class, that’s akin to a restaurant only selling you Champagne if you sit in a VIP area. Suddenly, you want (have?) to pay to be behind the velvet rope.

"Rundles"
I took Scott Galloway’s online business class, The Sprint, in 2020, and the class convinced me about the power of bundles. Galloway is especially fond of bundles that are billed monthly via a recurring revenue model, which he coined "rundles." (Read my post about Galloway's Sprint booklet which mentions rundles here: https://bridge.myshoplocal.com/news.cfm/19612/Subscriptions-Remove-Friction )

While our company offered bundles before I took the class, Galloway helped me ramp up the effort. This took years. In 2023, we finally successfully offered tiered (bundle) plans. Before 2023, our website’s pricing page promoted creating a retailer plan piecemeal. This was horrible for us and the retailer. It presented way too many choices to the retailer--and removed the benefit of bundles for us. We fixed this strategic error by updating the page and showing four plans (aka bundles) that were combinations of existing piecemeal services. On our pricing page, we placed these bundles above the piecemeal options. (View our pricing page here: https://www.shoplocal.org/pricing.cfm?retailers).

Since then, we’ve been honing these bundles, such as by adding more features, removing some features from others, and tweaking prices for them. For example, we used to charge the same transaction fee to a merchant when it sold an item via our platform for all plans. Now, we charge different commission fees on different bundles. The bundles allowed us to see the plans in a way that lent itself to charging different amounts for different tiers. In sum, without bundles, we’d have made it more challenging for stores to sign up for our service and left money on the table. 

Alex Hormozi is also a fan of bundles. In reading his book $100m offers, we learned about the importance of grouping solutions together, assigning a line item price to the items in the bundle, and then offering a bulk discount on the complete package. I’d like to see Galloway and Hormozi team up on an article about bundles. 

In fact, airlines are such an inspiration for bundling that I modeled one of our pricing modals after a Delta Airlines screenshot I’d taken when booking a flight. 

It’s a bird. It’s a plane. It’s Super Bundle!
Media company executives taking flights must be taking inspiration from the airlines. Before, media companies would bundle services under their control, such as when Paramount bundled Showtime with its Paramount+ service or when Disney bundled Disney+, Hulu, and ESPN+. But why stop there? Media companies are now forming bundles of bundles, shares The Wall St. Journal. Competing media companies are teaming up to bundle their services. The motive is twofold. One is to bypass the high fees charged by platforms like Amazon and Apple that the media company pays when the platform acquires the customer for the media company. Second, customers using bundles are less likely to cancel because of the confusion over what they’ll lose and the value they derive from it. Bundles are great at creating friction when a customer wishes to cancel or downgrade as the customer has trouble making sense of the value proposition—they’re just too many variables. 

We can see the bundle of bundles forming: Disney is teaming up with Warner Bros. Discovery. Peacock, Netflix, and Apple TV+ are joining forces (for Comcast’s Xfinity customers). If the media execs learn from the airlines, the airlines may start copying them. United Airlines and American Airlines could bundle their frequent flyer programs, or TSA and Clear could offer you a bundle deal for both services. (Already, airlines have partner airlines and operate under umbrellas such as Star Alliance, Oneworld, and SkyTeam.)


Benefits of bundling: 
Entities offering bundles seek a few benefits. 

Why offer bundles?

• Get customers to use more services. Bundles serve as a way to speed up usage and adoption of services--thereby hooking the customer and making the customer stick around.
• Box out competitors. When a person is using a bundle of services (especially a subscription like Prime), they are less likely to buy from competitors.
• Create friction when trying to cancel. Customers can't as easily compare costs and benefits when there are multiple variables. (I’d thought about calling this post “B-riction: Retaining Customers by Creating Friction with Bundles.”)
• Gain market share and acquire customers. Bundles are promoted as a deal to customers, and customers like deals. As such, a bundle may help a business acquire customers. 

Join the Party: Third-Parties
There are services such as Walmart+, that offer Paramount+ (normally $5.99), and T-Mobile, which includes free ad-supported Netflix, Hulu, and Apple+ for 12 months with terms. 

Like media and airline companies, we want to grow our customer base and reduce churn. Due to this, we want to offer our services to other outside companies via partnerships and bundles. I ask myself: Which companies or organizations can layer on our services? For example, I pitched to a tabletop organization adding our service to the group’s existing membership benefits. 
 
Growing Our Bundles
When assessing how to leverage bundles, I asked my team to ask themselves this: 

• What bundles do we currently offer?
• What do we not include in a bundle?
• What can we add to our bundles? 
• How easy is it to buy a bundle from us? Learn about our bundles? 

We want to make our bundles stickier. We may even add a “press for champagne” button. Or better yet, bundle the offering: “Press for champagne and to Sync products.”

Homework:
View your company's sales bundles. Suggest tweaks to make them better. What can you add? Remove? How can you increase your revenue?

If you're a retailer, what can you offer in a bundle to a customer or gift registrant?
If you're a brand, what can you offer in a bundle to a merchant?


Our related posts about bundles:
1. https://bridge.myshoplocal.com/news.cfm/21530/Walmart-Disney-___Bridge

2. Online dating apps like Tinder helped nudged us to adopt bundles and tiered pricing: https://bridge.myshoplocal.com/news.cfm/23154/Love-Those-Margins-) 

Read the full The Wall St. Journal article about media companies teaming up:
https://www.wsj.com/business/media/streaming-bundles-are-here-and-you-may-need-a-ph-d-to-navigate-the-options-104dc079?st=lb54m5sj8keuomx&reflink=desktopwebshare_permalink

P.S. ~ Thanks to my buddy Randy for encouraging me to take Galloway's The Sprint in 2020. That class introduced me to new ideas and set our business on a better path.

Tags:
united airlines delta airlines galloway hormozi tinder pricing tiers bundles rundle

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