How bundling services can help your construction business
Bundling services is a valuable pricing tool that has been used for decades to boost sales and profits in the fast food, cable television, HVAC, and roofing industries, but it has been overlooked by many small, service-oriented construction businesses.
Called “bundling,” it involves offering customers a combination of products and services in a single product offering, often at a modest discount to what they would pay for each component individually. Consumers generally equate bundles with savings, but research has shown that, because of the convenience they offer, bundling services can be successful even when consumers could save money by buying the items separately.
Why consumers like bundling
Some research attributes the success of bundling services to consumers’ desire to eliminate uncertainty. Consider the typical lawn service that offers several discrete services. It will mow, aerate, fertilize and apply pesticides to your lawn. But it can also prune your shrubs and mulch and weed your garden beds. Do you want to order and pay for those services one at a time, or would you prefer to basically outsource all that maintenance for a bi-monthly or quarterly fee?
Think of the last time you ordered food at a fast-food restaurant or went to the movie theater. Did you take the time to scan the menu and add up the cost of the individual items you wanted, or did you just order the $6.47 value meal or the soda and popcorn combo and get it over with?
If you were among the latter group, you may have succumbed to what’s been dubbed “the ambiguity effect” — people’s reluctance to make decisions, or select options, when information is not immediately available and the outcome of a choice is therefore unknown.
Offering the annual lawn maintenance package or combo meal allows your customers to skip the mental gymnastics and fulfill their need on the spot. Consumers generally find that tremendously appealing
One important caveat: be sure to continue offering your product and/or services separately to avoid alienating customers who prefer buying a la carte.
Bundling services can help your construction business
Offering bundled products and/or services allows a business to cater to consumers who are more focused on resolving a problem than saving money. Most service businesses have such customers, and it behooves them to offer bundled services that can save time and stress.
Benefits of bundling services are many. Consider the landscaping service above. Rather than preparing individual invoices to bill the client after each visit, the company can submit a regular bi-monthly invoice for a flat fee, greatly reducing paperwork. The company gains recurring revenue and more control over the property, which can be essential for boosting customer referrals.
Bundling products and/or services also allows a business to grow average transaction value, even if it offers modest discounts over a la carte prices. Every spring, for instance, paddle sports, ski retailers and bicycle retailers bundle lower-margin hard goods like kayaks, skis and bicycles with higher-margin apparel and footwear. The intent is to overcome consumer anxiety over trying a new activity and to boost the overall margins of a transaction.
Perhaps more importantly, bundling services allows a business to compete based on value and service rather than price. That’s because every construction business can come up with a unique bundle of products, brands and services that are not available from competitors. Again, it’s important to offer your services both a la carte and in bundles to avoid alienating potential customers interested in a specific item or service.
Finally, bundling products and services gives you permission to talk about the scope of your services and show off all the capabilities of your business. When a prospect calls looking for a very specific solution, you can work your bundled offering into the conversation. This lets the customer know all the products and services you offer and helps you qualify him or her as a lead for other services. Whether or not the customer opts for your bundle, you will know whether he or she is a potential candidate for your other services.
