Rule #1: Simplify Your Portfolio
No such thing as too many choices? Think again.
If a customer is presented with a large number of different options, they may have a tendency to suffer from “choice overload” – or a paralysis when making decisions. Several studies point this out, including psychologist Barry Schwartz, who claims that having too many choices can be just as frustrating as having too few.
When presented with very few options, a decision maker feels trapped. Too many options, and they begin to over-analyze and under-buy. By keeping a constant eye on the market, you’ll understand why your customers buy what they buy, and you can tailor your offerings to provide enough choices without being overwhelming. (Think of it as the Goldilocks standard.)
Once you have determined a simple but strong portfolio, it’s time to clearly present your offerings and upsell or cross-sell once your prospect identifies their initial package.
Bundling to sell products is a common sales practice, but there is little consensus on how consumers evaluate a bundle’s value. Some research shows that customers focus on the most valuable piece of the bundle and view the remaining items as “add-ons,” while others claim customers calculate the average cost of all items. With our own SMB Cloud Insights™ we see a very mixed bag of SMB preferences, with some SMBs that prefer bundles for the price reductions while others prefer à la carte purchasing so they can mix brands and have pricing transparency. As such, we recommend the more synergistic approach – that a suite of items can be evaluated at a higher value when the pieces are packaged in an appealing way.
Anchoring and Adjustment
When determining your portfolio or bundle, we recommend focusing on one cloud service category. We have found that being focused often leads to expanded profits by maximizing revenue per user and reducing churn.
First, you should choose your bundle’s anchor service, or the one service that an overwhelming number of your customers need. This core service is usually but not always a hosted service, and it will be featured prominently in the bundle.
After the anchor is selected, it’s time to build a portfolio that your customers perceive as strong but easy to evaluate. You’ll select value add-ons – or tools that complement your anchor and create more value when bundled with your primary service. Value add-ons can also be sold separately, giving your customer more control to arrange a unique bundle that best fits their needs.
Lastly, you’ll determine which tools and utilities should be included. These items are not typically sold separately – their main purpose is to extend the anchor’s features and functions while enhancing the user experience. Here’s an example of how to build a bundle: