How to Increase Shopify Revenue with Bundles and Bulk Discounts — Katie Keith | Why Stores Struggle With AOV, How Bundles Boost Sales and AOV, What Discount Pricing Psychology Works Best, Why B2B Versus B2C Matters, How To Tweak Discount Design (#438)

In this episode, we unpack bundles and bulk discounts and how they can nudge customers to buy more and boost revenue. 

Katie Keith, Founder and CEO of Barn2 Plugins, shares why most stores struggle to increase average order value and how her new Shopify app bridges the gap between different discount strategies. 

She also provides a masterclass on discount pricing psychology, setting tiers, and when to choose volume bundles over bulk discounts.

Topics discussed in this episode:  

• Why many stores struggle to increase AOV. 
• What the difference is between WooCommerce and Shopify discounts. 
• How to match your discount strategy to your target customer. 
• What makes the right moment to test and adjust your offers. 
• How to avoid a cluttered and confusing product page. 
• Why you must know your minimum acceptable profit margin. 
• What role psychological pricing plays in setting tiers. 
• How a fixed price offer can convert better than a percentage. 
• Why discounts aren't right for all types of products. 
• What flexible targeting options are available for discounts. 

Links & Resources 

Website: https://barn2.com
Shopify App Store: https://apps.shopify.com/barn2-bundles-bulk-discounts
LinkedIn: https://www.linkedin.com/in/katiekeithbarn2
X/Twitter: https://x.com/katiekeithbarn2

Get access to more free resources by visiting the show notes at https://tinyurl.com/3skdcmaw

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Transcript

00;00;00;03 - 00;00;17;18
Speaker 1
In terms of clutter, I think you need to think, what do people really need? So I would say you need to kind of understand your customer or your target customer and think what sort of quantity discount is actually going to maximize average order value.

00;00;17;20 - 00;00;38;07
Speaker 2
Hello and welcome to another episode of the E-commerce Coffee Break podcast. Did you know that most Shopify stores could boost revenue by 20% or more with the right discounts strategy? Yet few actually know how to do this the right way. So today we are unpacking bundles and discounts and how they can nudge customers to buy more. Joining me is Katy Keys, founder and CEO of Thorn to Plugins.

00;00;38;11 - 00;00;56;01
Speaker 2
She built more than 20 successful WordPress and WooCommerce tools and is now helping Shopify merchants grow faster too. She also co-hosts DWP Product Talk and Will Product Chat Podcast. So other podcasts hosted on the show. Looking forward to that. We have a lot to cover, so let's get started. Katy, welcome to the show.

00;00;56;04 - 00;00;57;13
Speaker 1
Hey, thanks for having me on.

00;00;57;20 - 00;01;02;10
Speaker 2
Katy Let's start in the beginning. Why do most stores struggle to increase average order value?

00;01;02;15 - 00;01;34;00
Speaker 1
I think a lot of stores aren't very good at tailoring the tools that are available to what their customers want and what sorts of products they're selling. And they're also often restricted by what's available for their platform. So, for example, it was really weird. So we've been selling WooCommerce plug ins since 2016, so that's nine years now. And we have a WooCommerce discount plugin so that people can create all sorts of discounts on their store in WooCommerce.

00;01;34;03 - 00;02;03;23
Speaker 1
So then we decided about a year ago, let's branch out into Shopify so that we're on multiple platforms and learn from the Shopify community as well as the WooCommerce community. And it was really interesting, the differences in the discount world in the two. So in WooCommerce, quantity based discounts, all about like creating tiers like by 2 to 5 and get a 10% discount by 5 to 9 and get 15% and so on.

00;02;03;23 - 00;02;40;22
Speaker 1
And you might display that in a table. And then when we went to Shopify, the approaches were completely different and yet surely the merchants are the same and the two, they have an ecommerce store and they want to offer discounts and entice customers to purchase more by larger quantities and give them a reward for doing that. And yet all the Shopify apps, the vast majority, we're offering something different, which I call volume bundles, which is more about small quantities like buy one for $10 by two for 15 and so on.

00;02;40;22 - 00;03;09;21
Speaker 1
So that pre-defined packages that literally does not exist in WooCommerce. There are no WooCommerce plug ins that offer volume bundles. And so we're adding that to our WooCommerce plugin as a result of learning from Shopify that will be available soon. But it was really interesting that just the ecosystems have developed different software tools for the two platform, but I think that the users needs are the same and probably they all want a choice of both.

00;03;09;23 - 00;03;25;12
Speaker 2
That's very surprising. I didn't know that. I'm not sure how that happened, but it's interesting. It's quite a steep learning curve to see two leading e-commerce platforms being so different there. So why do you think it's confusing to pick the right discount strategy when you're setting up your store?

00;03;25;14 - 00;03;48;10
Speaker 1
When you set up a new store, you often don't know who your customers will be, even you don't know how what sorts of quantities they're likely to buy. So if you on Shopify and you only have volume bundles available and you see dozens or hundreds of volume bundle apps which there literally are in the App Store, then you think, Oh, I'll offer volume bundles, great.

00;03;48;12 - 00;04;12;27
Speaker 1
So you install the volume bundle up, and that typically involves setting up fixed prices for small quantities, like a price for two, a price for three. And that's about it. But what if you sell the sorts of products that actually you could convince customers to buy ten or 20? Like, say, you're selling stationery or DIY things like nails and screws and things like that.

00;04;12;27 - 00;04;41;21
Speaker 1
Small items that people will buy more than a few of if you in centavo to do so. So in that case, maybe you want to create pricing tiers instead of volume bundles, but because you just see all these volume bundle apps everywhere, you think volume bundles will meet my needs. So I would say you need to kind of understand your customer, your target customer, and think what sort of quantity discount is actually going to maximize average order value.

00;04;41;24 - 00;04;53;13
Speaker 1
So that's why our first Shopify app on two bundles and bulk discounts has both because different ones will appeal to different people. And it's weird for a tool to only have one and not the other.

00;04;53;15 - 00;05;13;10
Speaker 2
No, that makes perfect sense. I think not knowing what your customers are looking for, that's obviously a bit of a learning curve when you start putting product in there. When's the right moment to really start playing around with bundles and volume discounts and different tiers to really find out what works.

00;05;13;12 - 00;05;36;08
Speaker 1
As often as you have good enough data in order to learn from what's already happened. So if you've got a really high volume store, then you can probably set something up. Maybe this may be testing with an app testing tool and get some good data within a week. If you have lower volume, lower revenue, no numbers off orders, it's going to take longer.

00;05;36;08 - 00;05;57;01
Speaker 1
You're going to need to let it sit for a few weeks or even a month before you've got enough orders to really see how people are using those discounts. And then if you're not app testing, maybe after a month or something, it's time to make some changes to the structure of your discounts, maybe switch from volume bundles to tiered pricing or something like that, or vice versa.

00;05;57;06 - 00;06;03;07
Speaker 1
And then again, measure your average order value over that period and see how it's been impacted.

00;06;03;10 - 00;06;22;02
Speaker 2
Mm hmm. Now, I come along some sales pages from time to time, product detail pages. They offer discounts, but it looks cluttered. It looks confusing. You don't really get the idea. How do you make sure that people really understand the benefit and how to make it easy for them to pick the right discount?

00;06;22;04 - 00;06;45;28
Speaker 1
Yeah, I think it's really important to keep it clear and it's so easy for product pages to get cluttered as well, particularly with the typical layout which has an image in the on the top left and then all the purchase options on the top right. And sometimes stores get it a bit wrong because the right hand column ends up being loads longer than the column with the image, and it just looks badly designed and not ideal.

00;06;46;00 - 00;07;17;24
Speaker 1
But in terms of clutter, I think you need to think, what do people really need? And an example of this is we're currently as well as our Quantity Discounts app, which is available already, we're building a Shopify B2B wholesale app, again, using our WooCommerce experience because we have a very popular WooCommerce wholesale plugin. And when I was researching the competition for Shopify B2B apps, I found some that have features that I think are really weird for B2B, like free gifts.

00;07;17;27 - 00;07;41;20
Speaker 1
So think about that. A wholesaler is buying products to resell that they regularly buy. Why would they want a free gift? A free gift is an essentially retail strategy. So that's an example in my way of saying that to keep the product page declutter, to think about what offers you've got and whether they are relevant to your audience and the type of products you're selling.

00;07;41;26 - 00;07;55;09
Speaker 1
So in that wholesale example, they just want a really quick way to buy the products they already know. They don't need things like free gifts because they're not buying it for themselves. So that's an example of clutter on the product page I would immediately get rid of.

00;07;55;12 - 00;08;07;29
Speaker 2
Mm hmm. I want to talk a little about the discount rates or steps of discounting. What makes sense there. So for our listeners, we have never had to discount while in discount there. What kind of different tiers would you offer?

00;08;08;06 - 00;08;30;02
Speaker 1
Well, the first step is to work out your minimum acceptable profit margin on each item and never discount more than that, whatever quantities they order. So it's tempting to just keep adding tiers and think, Oh, it's great if people buy 50, I'm going to give them 50% off. But really set yourself a maximum because you may not be able to afford that.

00;08;30;05 - 00;09;00;14
Speaker 1
And so think then planning around your most generous tier. So that's the biggest quantity that should be a profit level that you are still happy with. And then I would use psychological pricing strategies to create the tiers below that, whether that's volume, bundles or bulk discount tiers. So round numbers are often good. It's also worth thinking about whether each tier is going to offer a percentage discount or a fixed price that you've already created.

00;09;00;17 - 00;09;28;29
Speaker 1
And in our band, two bundles and bulk discounts that we allow you to create either a fixed price discount like $10 off or 10% off. And often the fixed amount can convert better because customers don't have to do the maths themselves. It tells them what they will pay. So used things like round numbers because you know, everybody knows that with pricing ending in a 99 or something could make people buy because it makes the price look lower.

00;09;29;06 - 00;09;49;25
Speaker 1
But you want to make the discount look higher. So if you are displaying percentage discounts, then round up to do 15% rather than 14% for example, or something like that. And then if you're doing fixed price offers, you want to do the opposite. So you want it to look as cheap as possible. We might use the 99 strategy then.

00;09;49;27 - 00;10;19;04
Speaker 1
So use psychology is also worth looking up. It's a concept called just noticeable difference pricing, and it means that there are some prices where if you increase the price, the customer literally won't notice the difference in terms of their perception of the value. So one example of that is if you've got something that's $239, you can charge two for nine and nobody's going to notice.

00;10;19;07 - 00;10;38;14
Speaker 1
Whereas in contrast, the difference between 99 and $100 is huge psychologically, because you've got into that three figure territory. So combine all of those pricing strategies when setting up your discounts and that will get the best results. And then evaluate and experiment, as we just talked about.

00;10;38;16 - 00;10;54;14
Speaker 2
Hmm. Katy just gave a little masterclass here for our listeners on how to set up the rise discount pricing structure. I think for everyone who is listening and has never done a discount structure, listen to this twice. That is the way on how to do it. Now, I want to touch a little bit on the technology side of it.

00;10;54;14 - 00;11;05;11
Speaker 2
You're coming from the WooCommerce side. Shopify works in some parts a little bit different. What's the implementation process? What kind of homework do I need to do to get started? Walk me through it.

00;11;05;13 - 00;11;29;04
Speaker 1
So yeah, it's pretty easy. So you're probably already used to installing apps from the App Store, so you just go to the App Store. Look for band to bundles and bulk discounts and just install it because it's new. We're offering it free at the moment until you start selling a certain volume through your discounted products. So you can install it for free.

00;11;29;06 - 00;12;02;13
Speaker 1
I mean, even after we remove that, we will always offer a free trial anyway, so you can install it free and play around with it. See how the discounts work on your site before you even commit. And then it's just a monthly fee anyway, even if you do end up paying. So it's no real commitment and it's worth having a play with, particularly trying out the two types of discounts because most Shopify quantity discount quantity break apps don't have any kind of tiered discounts, tiered pricing tables which allow you to sell higher quantities.

00;12;02;13 - 00;12;08;08
Speaker 1
They're all focused on those more retail focused bundles that appear on the product page.

00;12;08;11 - 00;12;17;26
Speaker 2
Mm hmm. Can you give us some examples of brands that you've worked with? You don't need to name the brand, but what kind of results they saw after they have implemented discounts.

00;12;17;28 - 00;12;45;11
Speaker 1
It's too new for me to say that on the Shopify side of things, I have been watching our analytics closely and I've noticed that at least three of our users are seeing regular discounts through our Shopify app, which is great because it's so new in WooCommerce. You don't get data about your users because it's self-hosted, but with Shopify, you can actually use tools to see how people are using it and then you use that to improve your app.

00;12;45;13 - 00;13;11;23
Speaker 1
So it was really interesting how these three stores that were getting sales through our app have completely different use cases. I think one was something really technical and practical. One was more of a gift shop and I can't remember what the other one was, but it was radically different. So that told me that there are lots of different use cases and I can also see that some of them are using volume bundles and some are using the bulk pricing tiers.

00;13;12;01 - 00;13;25;17
Speaker 1
So it was really nice to see that people are using both types and getting sales from both. So again, that goes back to what I said about needing to really understand your products and your customers and there's no one size fits all approach.

00;13;25;20 - 00;13;39;26
Speaker 2
Mm hmm. No, totally. Now, you just gave a couple of examples. What kind of articles? And these industries that can be used to and you think about industries where bulk discounts or volume discounts might not be a good idea.

00;13;39;29 - 00;14;03;22
Speaker 1
Yeah, there's plenty. It's definitely not for everybody. So one the volume discount side, I'd say don't do that if you want to sell in bigger quantities or if it's something that you customers are only going to buy one of that product, but you want them to buy related products, then our app isn't for you. You'd want something a bit more about mixing and matching.

00;14;03;27 - 00;14;28;16
Speaker 1
For example, let's say you're selling dining furniture. You're not going to really think, Oh, there's a volume bundle. If I buy three chairs instead of two. If you want to charge, you want two chairs, you have the space you have. Instead, you want to be cross-selling different products, like why do you buy a table? And for example, with the chairs and those sorts of things.

00;14;28;16 - 00;15;00;17
Speaker 1
So I'd say that's not about quantity pricing. That's about cross-selling different products. And similarly, if you are selling the sorts of products that nobody would ever buy, more than one of I'm struggling to think of, let's say a car cover, you want one car covered and you've got the car you want to cover up. I say that because I designed a website for a car cover company once, and it was a very different type of website to the other ones that we've done because they just had one product.

00;15;00;19 - 00;15;03;07
Speaker 1
You're not going to buy it free of those because it's cheaper.

00;15;03;12 - 00;15;26;00
Speaker 2
You know, that makes total sense. I can imagine that somebody buys a bulk of different car covers. Well, maybe they have different cars. I don't know. I wanted to touch a little bit on the implementation going back there. Obviously, you don't want to discount and have discounts on every product on which level can you install the discount products, bulk discounts within Shopify?

00;15;26;03 - 00;15;50;29
Speaker 1
Yeah, we've made it pretty flexible. So when you create a discount, you can have it globally on all products which you might want to do if all your products are the same kind of thing. Like let's say you only sell pens for example, maybe you do want to offer the same discounts on all of your pens and that and also with the bulk discount tiers, you can mix and match discounts across multiple products.

00;15;51;06 - 00;16;21;06
Speaker 1
So let's say you it's a discount on $0.10 and you buy ten different pens that works so you can spread it across products in that way. So that's the global one. You can also select specific collections or individual products that the discount will apply to, which you might want to do if you sell radically different products and that have different ways of appealing to the customer, or at least that you need different pricing for, of course.

00;16;21;08 - 00;16;55;01
Speaker 1
So that's important. I mean, with percentages you can spread that across products and so long as your margins are similar on each product, then it's fine to apply the same percentage discount to many products. Whereas if you're giving exact fixed pricing for your bundles, then you wouldn't want to do that because it needs to be per product. And in the last two weeks we've added a new markets feature because one of our early testers said hang on, I need to sell diff discounts based on the market, which is based on the country.

00;16;55;03 - 00;17;14;01
Speaker 1
And because we're new to the Shopify side of things, our background is WooCommerce. We didn't even know that was a big thing in Shopify because in e-commerce there is no such thing as that. There just isn't a concept of markets. So we thought that's a really valid use case and we quickly added it to the app.

00;17;14;04 - 00;17;30;17
Speaker 2
Mm hmm. It's interesting to see that there are so many differences between somebody who own WooCommerce and I have you. WooCommerce used myself in the past, and I'm doing Shopify for a very long time, but it's literally what you want to do. Different systems and the one might be more perfect for the one seller and the other one for the other seller.

00;17;30;19 - 00;17;37;00
Speaker 2
Now, before our coffee break comes to an end, Katy, is there anything you want to share with our listeners that we haven't covered yet?

00;17;37;02 - 00;17;58;04
Speaker 1
I don't think so. I feel like we've been fairly comprehensive talking about all the different ways to get the most out of your discounts. I suppose one thing I would say that we haven't covered is about tweaking the design and the settings of because of your discount, because it's displaying, say, volume bundles or tables of discounts on the front end.

00;17;58;06 - 00;18;24;20
Speaker 1
And there are options that you can tweak it, particularly with the volume bundles, because you can add things like labels and highlight a particular row. So you might highlight the most profitable one and right popular or something like that. So again, this comes back to the psychology of clearly labeling your discounts even with the bulk pricing, which is more of a standard table of buy this level and get this discount.

00;18;24;26 - 00;18;45;00
Speaker 1
You can still edit some of the text like the heading above it to say something like Buy More and Save or something that conveys that extra value that the customer is going to get. Because this is all about mutual benefit. Everybody wins because the customer gets a better deal and you get a higher average order value from that sale.

00;18;45;02 - 00;19;02;13
Speaker 2
Yeah, I totally agree. If somebody is willing to buy a product and it is a product where you can sell more than one, it makes sense. The person is already in the mindset to buy something and then it's very easy to get them to buy to five or ten of them, depending on what it is. This was a really good masterclass in discounts.

00;19;02;13 - 00;19;04;16
Speaker 2
Where can people go and find out more about you guys?

00;19;04;23 - 00;19;34;05
Speaker 1
So our website is open to ICOM that does have links to the app on the App Store, although you can also find it just by searching the App Store for bounty or bounty bundles and bulk discounts. And me personally, I'm very active on X and my profile is Katy Keith Band too. And also I have the same handle on LinkedIn, which I'm using more and more because since getting into Shopify, I discovered that LinkedIn is the go to social network for Shopify app founders.

00;19;34;05 - 00;19;37;00
Speaker 1
So building a community there as well.

00;19;37;03 - 00;19;50;13
Speaker 2
Yeah, that's where we are hiding. I would put the links all in the show notes. So then you will be just one click away, you know, But a lot of our listeners will reach out to you and test it out. I think it's a great app and again, I think it's the easiest way to increase your average identity.

00;19;50;15 - 00;19;53;10
Speaker 2
Katy, thanks so much for your time today and I hope to talk to you soon again.

00;19;53;16 - 00;19;54;18
Speaker 1
Yeah. Thank you so much.