Winds of Change
If you’re in the Hosting Services industry, you know demand has grown significantly over the past five years and this trend is poised to continue*. SMBs not only will demand more complex websites but will also look to their hosting company to offer up value added tools and services such as website design, management services, information resources, ecommerce and SEO optimisation tools, among others. Simply offering web hosting isn’t going to cut it, especially if you are looking for ways to maximise your revenue per customer, customer lifetime value and overall profits..
What boosts your profits while making customers happy?
To increase profits from your current customer base as well as get new customers, you can turn to the tried and true method of bundling services.
Bundles of Joy
Cross-selling, up-selling, bundling; you’ve heard these terms a million times if you are even tangentially involved in your company’s marketing and sales. So, what is bundling and how does it apply to you?
When you are bundling, you are offering several products for sale as one combined product, that is often more conveniently priced to the buyer than if he bought both separately. Another related strategy is to make product pairing suggestions (ever seen Amazon’s “customers who bought this product also purchased this one”? – that’s their very powerful and effective recommendation system). What’s notable about this is that it is a case where both you and your customer come out satisfied.
So why is bundling so effective?
Product bundles often have a higher perceived value to the buyer even if they turn out more expensive than buying a single product, and they have even shown to be a good way to keep high value buyers with you and away from competitors**.
Research from Parallels shows us that web apps are usually purchased as a bundle at the same time as their initial purchase, which means offering bundles upfront is the smartest way for hosting providers to use this to their advantage, as their customers aren’t likely to return looking for additional web apps after their initial purchase.
Finally, a one package deal means the customer will probably focus on the total value of the offer and try features that they may not have otherwise. Digital products are especially well suited to this kind of strategy – see Adobe Cloud or even our own Partners as examples.
marketgoo has tested bundling our SEO tool with two hosting partners and we’ve observed outstanding results, showing us that a web optimisation tool like marketgoo has a high perceived value among customers and is an offering that complements their web hosting plan well.
Start bundling today!
Keep these guidelines in mind when figuring out how and what to start bundling:
- Customers want to know what their savings are, loud and clear. Tell them why this is a good deal for them, and how much they’re saving.
- You can generate a promotion at checkout time where the buyer has a one time opportunity to purchase the second tool or service at a discount.
- Make sure whatever products you choose to bundle together make sense. Pairings that seem random won’t go over too well.
There have been studies which suggest that for a customer or potential customer to truly be able to see the value of the bundle, they need to be able to purchase the products separately as well. This seems to be because they feel like they have an actual choice. You can choose to go this package deal route, or offer your products as a single bundle item. We have seen success with the latter when it comes to our Hosting company partners, but it comes down to testing what works best with you.
Bundling makes your customer happy too.
As we mentioned earlier, bundling works well because it offers you higher margins at the same time it offers your customers true value. Your customers are purchasing your products and services because they address a set of particular needs. Like we said, every passing year your customer base becomes more complex and accumulates multiple needs. If you have a product bundle that addresses most or all of these needs, you are an incredibly convenient Hosting provider.
Curious about how we Bundle?
As we mentioned, our Partners who have decided to bundle our feature-light SEO product (marketgoo Start), have had above-average results,, and the numbers speak for themselves:
- Payback Period: 4 months after the Partner’s bundling strategy was implemented, it reached a positive ROI. Since the industry regularly sees 12 month payback periods, this result is very above average.
- The investment offset rate was of 1.6%. This means that as soon as 1.6% of users on the bundled ‘lite’ product (marketgoo Start), upgraded to marketgoo Evo (full feature version), the Partner got an offset of the investment. Since acquisition is one of the highest expenses companies face, this was a welcome result.
- MRR: After the first 6 months of offering the ‘lite’ product that was bundled, the MRR for it exceeded 10,000 € EUR. This is clearly a ‘win’ in the growth and revenue department, requiring a low input and generating a major output.
- Conversion Rate: the overall conversion rate, from the feature-light marketgoo Start, to the full feature marketgoo Evo, is between 5% – 7%. With highly customisable contextual calls-to-action within the tool and a clear user upgrade path, Start boasts a solid conversion rate.
Drop us a line so we can send you more info about our case studies and see how bundling could work for you.
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Wondering about our Partners Program? Go here for the details!
* http://www.ibisworld.com/industry/internet-hosting-services.html
** http://journals.ama.org/doi/abs/10.1509/jmkr.44.4.647
