How to Create a Smart Bundling and Recommendation Engine
Bundling and personalized recommendations are known tools for increasing sales and revenue, but just like any sales tool, there’s an effective way and an ineffective way to implement them. Making recommendations to your users that don’t align with their preferences can have a negative effect on their perception of your platform. It can make them think your selection is lacking or that your recommendation system doesn’t have a good understanding of your customer base. Driving recommendations and bundles with current analytics and user data will optimize each offering to exceed user expectations and achieve the highest possible conversion rates. This smart strategy is the best upselling and cross-selling method to increase both immediate and ongoing sales and revenue.
What is Smart Bundling?
Bundling is the strategic grouping of products and offerings to improve value to the consumer by providing a more comprehensive solution or by offering discounted prices for certain product combinations. So, what makes bundling “smart”? Smart bundling is wholly or partially automated bundling that uses endpoint analytics and user data to decide which bundles are most likely to convert each user. It improves consumer perception of your platform by enhancing the customer experience, increases your average sales value and revenue, and enables a level of optimization that’s not possible through manual bundling and analysis.
What is Smart Recommendation?
Smart recommendations are automated product or title recommendations that are based on the behavior and the user data of each user. Because they’re automated, smart recommendations can drive huge increases in sales and engagement without any ongoing management. You can place recommendations in strategic locations on any page, starting with a “Popular” section on your Home page and ending with a “Customers Also Purchased” section on the product pages.
Smart Bundling and Recommendation Features
Smart bundling and recommendation engines operate on conditional logic that dictates suggestions and pricing, including deals on shipping, if applicable. The grouping of each bundle or set of recommendations should also be customized per page or segment. For example, it wouldn’t make much sense to have a “Frequently Purchased Together” section on the Home page before the user has chosen any other products or titles.
The layouts you choose can influence your customer experience. Keep each layout clean and make it easy for customers to choose individual items, bundle options, and recommendations. Streaming platforms would be wise to have a “Watch Later” type option for customers who are interested in the recommendations but don’t want to navigate away from their current selection.
Other bundle options for providers include quantity-based discounts, product variation options (by size, color, etc.), and smart inventory insights that enable you to actively control the visibility of products and titles that are more popular or more available.
Benefits of Smart Bundling and Recommendations
For the customer, the benefit of smart bundling and smart recommendations is an enhanced customer experience. Using your platform, the customer can easily find titles that are in their categories of interest or browse categories that others with the same interests and behaviors have enjoyed. This improved experience benefits the brand by increasing consumer engagement and satisfaction.
Making even the most low-impact decisions is difficult some days. Bundling and recommendations help remove some of the pressure of decision-making for users on your platform because all they have to do is click on the next title or choose the bundle that catches their eye. When the bundles and recommendations are tailored to the consumer’s preferences, they can even improve purchase confidence.
The endgame for any investment is going to be to increase revenue and profits. Smart bundling and recommendations work towards that end in several ways. First and foremost, these are both upsell and cross-sell tools, meaning they boost individual and average sale value. They achieve this by increasing the visibility of titles customers are more likely to buy and by introducing an opportunity for the customer to receive a better value.
In a more roundabout way, smart bundling and recommendations increase your revenue by improving customer feedback, which helps your secure more customers and potentially scale your business. User analytics and behavior monitoring from your bundles and recommendations will give you further insights into your churn, cart abandonment, and other behaviors that can be used to improve performance and increase revenue.
What are upselling and cross-selling?
Upselling is a way to increase the total value of a sale by upgrading the product the consumer has already chosen. You can do this with an add-on or by getting the buyer to switch to an upgraded version of the product. Upselling is effective because the buyer is already convinced to make the purchase, so the only thing left to do is convince the buyer that they need a more advanced system. In video streaming, upselling is often done on subscription services but can also be done on individual title purchases and rentals.
Cross-selling is the sale of items that are related to the item or items the buyer has already chosen. This type of value increase is what you typically get with bundling and recommendations, though bundling can also be used to upsell certain items. Your recommendation categories like “Customers Also Bought/Watched” are prime examples of cross-selling marketing.
How to Create Effective Smart Bundles and Recommendations
Effective bundles and content recommendations start with consumer segments. Without a high level of accurate personalization, your investment into these site features could be wasted. Customers don’t want to feel like you’re just pushing any product on them with no consideration for what they’ll enjoy or get value from. By combining UX/UI insights and user data, you can create segments and product packages that will improve your customer experience and increase your platform’s profitability.
1. Analyze Content Consumption Patterns Within Your Platform
Segmenting your audience starts with analyzing consumption on your platform. With the right analytical tools, you’ll be able to extract patterns in consumer behavior that will tell you what titles consumers with similar tastes are likely to choose. When you know what they’re likely to choose, you can serve up options that will achieve much higher conversion rates than randomly generated recommendations or recommendations that are based solely on inventory performance. By making consumer behavior the foundation of your segmentation (and therefore the foundation of your bundle/recommendation engine), you optimize your ROI and your customer experience.
2. Combine UX/UI Insights with User Data to Create Segments
User experience (UX) and user interface (UI) insights tell you how your customers interact with your platform and your products. (These are the behavioral patterns you analyzed in Step One.) User data is the data provided and owned by the user. It tells you about the consumers who are using your platform and products. Once you have a solid base of UX/UI insights from your platform’s behavior and consumption analyses, you can combine it with your user data to refine consumer segments that respond predictably to suggested titles in bundles and recommendation categories.
3. Build Packages That Respond to Each Segment
Once your segments are defined, it’s time to build your packages. Each segment will have several packages, and the package offered will depend on where they are in their consumer journey. You can present recommendations and bundle options at any and every point in the browsing and purchasing process. Varying the value of each bundle can encourage customers to choose one.
4. Continuous Monitoring
Continuous monitoring of your platform’s visitor activity will enable you to continue optimizing your rule-based recommendations to improve the shopping and viewing experience of each consumer segment. Some activities to watch are product status per user (added to cart, purchased, viewed, watch list, removed from cart), total purchases (to track in-demand products and titles), and trending categories.
How to Choose the Right Products
Having the right products or titles in the right places is essential for achieving a significant ROI on your bundling and recommendations. Some recommendations are simple. For example, if someone watches the first two parts of a trilogy, it makes sense to recommend the third. Trilogies and other sets can also be bundled together to give the viewer a discount on the total price.
Other connections are less obvious. For example, you might be tempted to pair more expensive titles with less expensive titles in bundles to increase your margins, but consumer behavior analyses will show that the cheaper title will reduce the perceived value of the more expensive title and discourage consumers from paying the actual value of the package. Instead, bundle similarly priced titles together.
Keep your bundles small and simple. Bundles only work when the consumer can plainly see the value they’re receiving, but it’s difficult to see the value when the bundle is overly large or complicated. Be sure to offer the same products or titles separately. A four-year consumer product study concluded in 2005 showed that more products were sold when consumers could clearly see an option to buy the bundled products separately.