Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / How DTC Brands Use Bundling to Increase Average Order Value
Transcript
- Lucas: There's a supplement company I've been following — they call themselves a 'modern wellness brand' — and they launched a starter pack bundle about eighteen months ago. Three products, one box, priced at what looked like a steep discount. Turns out the bundle's margin was actually two points higher than selling each item individually. Luna: Wait — they made more margin on the bundle than on individual sales? How does that work? Lucas: Economies of packaging and shipping. One box instead of three, less dunnage, lower carrier cost per unit. Plus the bundle customers almost never returned individual items — they returned the whole box or nothing. Return rate dropped by half compared to single-item buyers. Luna: So the bundle is cheaper to fulfill and less likely to come back. That's a double win. Lucas: Exactly. And the real kicker — their average order value jumped from about $48 to $64. That's a 33 percent lift in AOV. For a DTC brand where customer acquisition costs are through the roof, that kind of math is everything. Luna: What was the bundle discount? Like, how much did they 'give away' to get that lift? Lucas: They listed the bundle at 22 percent off the individual price. But because their cost to fulfill was lower, their gross margin actually improved. So the customer feels like they're getting a deal, and the brand is making more per transaction. That's the bundling sweet spot. Luna: It's almost like the discount is an optical illusion. The customer sees savings, the brand sees higher margin. Lucas: That's exactly what it is. And that optical illusion is why bundling has become such a central lever for DTC brands in 2026. The ad costs aren't coming down — if anything, they're creeping up again this quarter. So brands need to extract more value from every customer they acquire. Luna: I think the classic mistake is assuming any bundle works. I've seen brands just throw their top sellers together and call it a day. But that doesn't always convert. Lucas: No, it doesn't. And there's research on this — a 2024 study from the Journal of Retailing found that the best-performing bundles have what they call 'complementary coherence.' The products need to make sense together in the customer's mind. A protein powder and a shaker bottle? Great. A protein powder and a face moisturizer? Confusing. Luna: Right — the coherence matters. And the best DTC brands test the hell out of which products pair well. Lucas: There's a home goods brand — they sell everything from candles to throw blankets — and they use purchase history data to generate 'complete the look' bundles at checkout. If you buy a ceramic vase, the algorithm suggests a bundle with dried flowers and a coaster set. They said that bundle has a 19 percent add to cart rate. Luna: That's way above typical cross-sell rates. Most brands see, what, 2 to 5 percent? Lucas: Yeah, standard cross-sell is around 3 percent. So 19 percent is a massive lift. And it's all driven by data — the algorithm learns which products are frequently bought together and surfaces that bundle at the exact moment the customer is already in a buying mindset. Luna: So the timing is critical too. It's not just what you bundle, but when you offer it. Lucas: Exactly. Pre-purchase bundles — like the starter pack I mentioned — work best for new customers. Post-purchase bundles, like the 'complete the look' at checkout, work for returning customers. And then there's the post-purchase upsell: 'You just bought a coffee subscription — add the ceramic mug for $12.' That converts at a surprisingly high rate because the customer is already committed. Luna: I've experienced that as a buyer. Once I've hit 'add to cart,' I'm more willing to tack on something small. It feels like I'm already in the flow. Lucas: That's the psychology — what behavioral economists call 'the endowment effect.' Once you feel ownership of the main purchase, adding to it feels less like a new decision and more like completing a set. Luna: But there are pitfalls. I remember a mattress brand that tried bundling pillows, sheets, and a mattress protector with every mattress purchase. They thought it would boost AOV, but their conversion rate actually dropped. Lucas: Yeah, I remember that case. The issue was that the bundle made the total price look too high. Even though the mattress itself was competitively priced, the bundle pushed the cart total above a psychological threshold — I think it was around $1,200 — and customers balked. They ended up unbundling and offering the accessories as optional add-ons instead. Luna: So bundling can backfire if the total price scares people off. The trick is to keep the bundle at a price point that still feels like a single purchase, not a big commitment. Lucas: Right. And that's where dynamic bundling comes in. Instead of a one-size-fits-all bundle, you let the customer choose from a few pre-built options, or you use their browsing history to tailor the bundle on the fly. A beauty brand I know does this — if you've been looking at serums, your bundle might include a serum, a moisturizer, and a free sample. If you've been looking at sunscreen, different bundle. Luna: That feels less pushy and more helpful. It's like the brand is saying, 'Here's a routine that works for you.' Lucas: Exactly. And the data backs it up — personalized bundles convert at roughly 2.5 times the rate of generic ones. That's from a 2025 report by a major e-commerce platform. The brands that invest in personalization for bundling see a measurable lift. Luna: What about the operational side? I imagine bundling can get complicated with inventory management. Lucas: It can. If you offer too many bundle permutations, you're basically creating hundreds of SKUs, and that's a nightmare for warehouse picking and stock forecasting. The best approach is to limit bundles to a handful of high-performing combinations and use data to decide which ones to keep. One brand I spoke with said they test fifteen bundles per quarter and only keep the top three. Luna: That's disciplined. And it prevents the inventory bloat that kills margins. Lucas: Honestly, if this episode sparked an idea you end up using, that's the link — buy me a coffee dot com slash fexingo. The smallest possible way to say the show is worth it. Luna: Yeah, listener support is what keeps these conversations ad-free. It's a simple way to keep us going. Lucas: So back to bundling — another trend I'm watching is subscription bundles. Instead of one-time bundles, brands are offering a recurring bundle that ships every month. A pet food company does this: you choose a 'puppy pack' or 'senior pack' and it auto-renews. The AOV is higher, and the retention rate is 40 percent better than individual subscriptions. Luna: That makes sense. The bundle itself becomes the subscription, so there's no decision fatigue each month. The customer just gets their box. Lucas: And the brand gets predictable revenue. It's the holy grail for DTC: higher upfront value, better retention, lower churn. The only caveat is that the bundle content has to stay relevant. If the pet gets older and the food changes, the bundle needs to adapt. Luna: So there's a data feedback loop. The brand needs to know when the customer's needs shift. Lucas: Yes. And smart brands use purchase frequency and product reviews to trigger bundle updates. If a customer has been buying the same bundle for six months, maybe it's time to offer a 'level up' bundle with more advanced products. Luna: That's almost like a product journey, not just a transaction. Lucas: Exactly. The best DTC brands think of bundling as a relationship tool, not just a pricing tactic. It's about guiding the customer from a first purchase to a deeper engagement with the brand. Luna: I want to circle back to the pricing psychology for a second. You mentioned the 'endowment effect.' Are there other psychological principles at play? Lucas: A big one is the 'decoy effect.' If you offer a $30 single product and a $50 bundle of three, the bundle looks like a steal. But if you add a mid-tier option — say a two-pack for $40 — the three-pack becomes even more attractive. The decoy makes the bundle the obvious choice. Luna: So you're not just bundling products, you're designing a choice architecture. Lucas: Exactly. And the brands that do this well test the pricing tiers rigorously. A 1 percent difference in the decoy price can shift conversion by 5 to 10 percent. Luna: Are there any DTC brands you think are doing bundling exceptionally well right now? Lucas: I'd point to a men's grooming brand — they have a 'shave kit' bundle that includes a razor, blades, shaving cream, and aftershave. It's been their top-selling product for two years. They update the bundle seasonally — winter kit has a heavier moisturizer, summer kit has an SPF balm. That keeps it fresh and relevant. Luna: Seasonal variation is a smart way to prevent bundle fatigue. The customer feels like they're getting something new. Lucas: And it gives the brand a reason to re-engage customers via email or SMS: 'Your summer shave kit is ready.' That's a marketing message that feels like a service, not spam. Luna: I think we've covered the spectrum — from the psychology to the operations to the data. What's the one takeaway you'd want a DTC marketer to remember? Lucas: Start small. Pick your two best-selling products, bundle them at a price that feels like a deal but preserves margin, test it for a month, and measure AOV and conversion rate. If it works, expand. If it doesn't, kill it fast. The brands that win at bundling are the ones that treat it like a continuous experiment, not a one-time tactic. Luna: Good advice. And maybe the next step is to look at your customer data to see which products naturally co-occur in the same cart. Lucas: Exactly. The data is already there — most brands just aren't looking at it. That's the low-hanging fruit.