MICROSOFT’S near-monopoly in computer operating systems and office software is well known. It was achieved, to a significant degree, using a very simple low-risk high-return marketing strategy you can use in your business that will increase the value and profitability of every sale you make and will deliver greater value to your customers.
‘Packaging’ your products or services is the simple process of combining a group of individually desirable and naturally complementary products and/or services and offering the package for a single fixed price that represents almost irresistible value to your customers compared to buying the components separately.
This is different to the concept of upselling that I wrote about last month. Instead of waiting for the customer to buy one thing and adding products or services after the fact, packaging (or ‘bundling’ as it’s referred to in some industries) brings two, three, four or more products or services together to form the initial offer to your customer.
It’s easy. It can dramatically increase your incremental profits and it also allows you to sell complete solutions that lock your customers into the use of those products. This is a win-win situation for both you and your customers. They receive a simplified purchasing process and discount on a complete solution while you increase your sales and can often own your market.
Individual products or services are just one component in a much larger picture. It is only when your product or service is combined with other actions, products, services or components that maximum performance is achieved.
When Microsoft started offering its word processor, spreadsheet, presentation package and database in a single package as Microsoft Office, it created irresistible value compared to buying each component separately. It locked its competitors out of the marketplace and eliminated the hassle of finding and negotiating with multiple suppliers. Thus it became simpler and easier to buy the product.
The result was market domination and the Microsoft products became the industry standards, not because they were better than the alternatives but because it was much more convenient to buy everything from one source in a single package. Once-great names like WordPerfect, VisiCalc and Lotus 123 fell out of the limelight and the sales charts. Before long you could hardly give these products away – even then, takers were hard to find because they were no longer the industry standards.
In my view, you should always look for ways to simplify and maximise the purchasing process for your clients. Why sell the nut if your clients have to go somewhere else to buy the screw or the bolt? Sell both as a package.
If they need a power tool to fit or adjust the screw or bolt, create a package that includes the tool as well. If they also need a sealant, a lubricant or an adhesive, add that too. You’ll be surprised how many people will go for the packaged option.
I recently needed some rawlplugs and, when looking for them in a local DIY superstore, came across packages of multi-purpose rawlplugs offered together with the appropriately sized drill bit.
Even though I probably already had all the sizes of drill bit I would need, I bought at least three of these packages in different sizes because of the convenience of having the drill bit included and knowing that I would be using the right size for the job.
Offering packages to your customers will make their lives easier. You will also be providing a much better service, locking your competitors out and significantly increasing the value and profitability of each sale.
To create great packages you should always look at things from your customers’ perspective. Ask yourself what would give them a superior outcome? Which different products or services could you package advantageously to deliver greater value and performance to your customers?
Ask your customers what products or services they would like you to offer in the future. If you have particular combinations in mind, ask your customers which ones are of interest. Check out your competition and find out what products or services they are or aren’t offering.
Your packages can take many forms. You can offer an introductory package that’s designed to win new customers over to you. You can offer special-value packages, as Microsoft does with Office. You can offer larger units of sale packages which involve a discount for a larger purchase commitment at the outset. You can offer a choice of good, better and best packages. The more synergy you can bring together in your package, the better.
Microsoft has done this with Windows Vista and it’s surprising how many people go for the more expensive options. If ten million people each decide to pay £100 more for a better version of Vista, Microsoft will have added a cool £1 billion in revenue.
Nearly all of that will be profit because Microsoft has already sunk all the development costs and there is no additional cost of sale when you sell several products in a single package. You also only have to invoice or process the payment once, which reduces admin.
You can also package your time and expertise. Instead of billing on an hourly basis, you can sell five- or ten-hour increments at reduced rates. Instead of offering one month’s contract at a time, you can offer 12 months for the price of seven or eight.
You’ll be amazed at how many people will go for that option. You’ll frequently sell more hours to the same customers and some customers won’t use that time for months, resulting in positive cash flow.
There’s also a good chance that the package itself will appeal to a larger group of people than would normally buy your products individually. Sometimes people will buy because the package contains a single component they want and need. You can add incentives and payment terms and you can dramatically increase appeal by reducing the cost to a modest non-threatening monthly or quarterly payment by standing order, direct debit or charging to a credit or debit card.
The benefits of packaging are considerable. You give your clients better service, a complete solution and more value, which they love. You increase your target market and give your customers more reasons to buy.
Even though you might offer the complete package at a considerable discount compared to the cost of purchasing the components individually, you’ll often find that you aggregate so much more profit per sale.
Even a 50 per cent discount could translate into a 200-300pc increase in profit if the package appeals to five or ten times more people than would normally buy individually. At the same time you can corner your market and lock your competitors out.
But let’s finish with a word of warning: Packaging can be an extremely powerful strategy. Use it by all means to move your business ahead but don’t do what Microsoft did when it illegally abused its resulting monopoly position to maintain and extend its power into other markets, falling foul of legislators around the world.
Had Microsoft’s competitors also packaged their products to appeal to more buyers, many of those competitors would probably still be around today.
For more information, visit www.dspconnect.com
Robert Clay has been growing businesses since the age of 19. He started his first business with no capital, reaching no.3 in his field in the UK within seven years. His second business reached no.3 in Europe after three years.
After selling both businesses to one of the largest companies in Europe he was persuaded that his self-taught approach to marketing could be used to grow any business successfully.
He subsequently studied and mastered 116 of the world’s most successful business growth techniques, and since June 2000 he and his team at DSP Solutions have transformed the thinking of hundreds of smart successful business leaders by providing them with world-class knowledge of low-risk/high-return marketing strategies that really work in any business.
His new book and set of CDs, “”Learn how to grow your business … in just two hours.”” are available now for just £15 each plus £2.25 for post and packing. Order both together for just £25 plus P&P.
Call DSP now on 01908 357657 to order your copy or to arrange a free consultation.
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