How you choose to set prices can have serious implications for the immediate success, and future, of your business. Many businesses use prices to create different revenue scenarios and compete with alternative solutions in the industry. In the right circumstances, finding ways to offer customers a more comprehensive solution to their problem leads to improved customer satisfaction, better profits, and increased brand loyalty.
Tie-ins, or product tying, is the technique of selling products or services with another product or service. Tie-ins have been an extraordinarily profitable strategy for technology companies. As exampled when buying a printer is just the first purchase in a lifetime of ink purchases. Equally, when purchasing software, maintenance and assistance services can equal or surpass the purchase price of the software itself.
Packaged or “tied” goods are a form of business promotion that allows two products to leverage the value of each other to increase sales, and gain more attention. The idea is that by placing two compatible products together, you reach out to a target audience and offer them something more valuable for their money. With tie-ins, your company can grow, and your business can see better results in margins, and revenues.
Why Use Tie-Ins?
Perhaps the primary motivating factor that convinces businesses to use tie-ins in their pricing strategy, is that it allows them to target their market at the decision part of their purchase. At this stage in the customer buying cycle, most individuals, businesses, or clients have already decided that they could benefit from accessing your product or service. At this point, you have a unique opportunity to promote additional products that could enhance the item they already want to buy. By cross-promoting services and products at the point-of-purchase stage, the customer is more likely to increase the value of their conversion, because they see the benefit of additional products.
If you’re attempting to market a lesser-known product that could improve the impact of an existing, popular item, or service, allowing the lesser-known selection to piggyback on the more popular choice can spread awareness, and boost profits. As you begin to develop your reliability as a brand—by showing customers that you can offer them a comprehensive and beneficial solution to their complete problem—the improved relationship you develop with consumers will increase brand loyalty, and lead to more conversions.
Tie-ins are cost effective, because advertising, public relations, and joint promotions mean that you don’t have to spend extra portions of your budget on separately drawing attention to each product. Although you might have to pay more in advertising a package than you would for a single item, the partnership should provide a bigger impact for customers. The reason for this is that packaged goods and tie-ins may represent added value to the customer, attract new users, and give loyal customers a sense of benefit or reward.
How Can You Use Tie-Ins in Your Pricing Strategy?
There are numerous ways in which a business can choose to use “tie-ins” in their pricing strategy. For example:
- Multi-Brand tie-ins: This form of tie-in involves using products from numerous different brands to add value to a single purchase. For instance, one company may make an agreement with another to a package deal that allows one of their products to be included within a much larger bundle package.
- Vertical tie-ins: These are some of the most common forms of tie-ins for businesses that want to keep bundles restricted to their own particular brand. Vertical tie-ins involve selling related products together for promotional purposes – for instance, a hair care company might offer a special conditioner when a customer chooses to buy a particular form of shampoo.
- Coupon tie-ins: These tie-ins involve using an event to promote a particular item, then giving out a coupon that allows customers the opportunity to save money when they purchase that product with a related product.
Offering products together through “tying” can provide particular benefits for customers who value the prospect of buying numerous items at the same time. While making the sale more convenient for the customer, it also reduces costs for the manufacturer in terms of shipping, manufacturing, and promoting the products. The tie-in solution that you offer to your customers should focus on offering them the best solution for their money. The more value you offer in your packages and pricing strategy, the more customers will appreciate you, and the more you will generate brand loyalty.