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I’m always excited when our local oil change company offers ‘free’ windshield wipers with an oil change. The wipers for my car run $30 -$40 at full retail so sometimes I’m tempted to get an oil change early just to get the ‘free’ wipers. This is an example of a great package.
What’s a package you ask?
A package is simply an assembly of products and / or services bundled and priced together. Some are great, some are useless, and some are irrelevant. Your package components needn’t all come from you - for example Mr. Lube doesn’t make windshield wipers.
Why create a package? A well designed package can increase loyalty, increase sales and profits, be used to competitively differentiate, move older inventory, test new markets and so on.
How do you create a good package?
The better you understand your clients’ needs, and how they derive benefit from what you provide, the more valuable you can become to them. The retail world is full of examples of this. Car wash kits, pre-measured meal kits, skis bindings and boots - for example. Retailers know that you want to impress the neighbours with a sharp looking car, that you get home late and don’t want to figure out what to cook (but you still want to eat fresh), that you don’t want to get decision overload – you just want to go skiing. They also know that you will pay more for a curated package. Services can of course be assembled into packages as well.
Packages are not limited to products. Some other components can include design, installation, payment terms, financing, maintenance, recycling, training, support, community, promotion, guarantees and so on.
Packages can be priced in many ways.
My oil change company includes them in its package at no extra charge. However, the cost of the ‘free’ windshield wipers is recovered in reduced advertising costs and increased traffic.
In some cases, the package can be premium priced (more than the sum of the parts) if the client sees value in the curation and convenience your package provides.
An ideal approach is to create three packages at different price levels: good, better and best. This will help you to close more sales and likely for a higher ticket price.
Be careful not to get hung up on the gross margin percentages. Focus instead on the dollars involved. If the base product is profitably priced, then the add-on packages don’t need to carry standard overhead in order to contribute to profitability.
So,
1) start with your core products or services,
2) explore all the related tasks or products your typical client will use in the course of gaining their desired outcomes.
3) Then determine what you can package to help them achieve that outcome more effectively.
If you’d like to brainstorm some package ideas –please send me a note.
Thanks for reading,
Andrew Penny
This blog is the third in a series providing serious ideas that will involve a bit more effort than our last series on ‘easy things to do now’. If you missed them – you can read them all here.
Let us know what you think. Questions, comments, complaints and suggestions are always welcome!
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