E-Class #43: How to Make Widgets a Part of Your Business

Checkpoint:

You have a clear idea of how to recruit good people using an in-house strategy
You know how to advertise for, screen and interview potential employees.

What exactly are widgets anyways?

“Widget” is a marketing term used to describe product bundles or packages that are offered to customers for a lesser price than buying each of the products individually.

You buy widgets all the time. A great example are fast food chains where a complete meal is offered for a lower price than the cost of the food items individually. There is a monetary incentive to buy the widget, as well as an increased convenience factor.

This is a really simple strategy that can be applied to all sorts of businesses, and all kinds of industries. Spas package their services into various “spa day” combinations. Car companies sell you customizable upgrade widgets when you purchase a new vehicle.

The power of widgets lies in their ability to increase convenience and perceived value. Two items packaged together and priced lower than their combined individual prices appear to have more value than the two items separately. A “starter kit” or “how-to” package has a higher perceived value because it offers one-stop shopping. It doesn’t matter if you sell a product or a service, or both. Every business can find opportunities to combine their offerings.

In this E-Class we will cover:

What are widgets and how can they help your business?
How to increase your average dollar sale with widgets
Types of widgets
How to create profitable widgets in your business
How to price your widgets

How do you increase your average dollar sale with widgets?

Implementing a widget strategy into your business will primarily increase the average amount of money a customer will spend in your business. A widget allows you to increase the amount a customer will spend without investing staff time up-selling or marketing the product.

Widgets can also potentially increase your profit margins, especially if you combine a low margin item with a high margin item. Of, if you add on a low-cost service for a high price due to a high perception of value.

When you provide widgets with a high level of convenience, they can also contribute to your repeat business. If you can make your customer’s life easier by anticipating their needs and wants, you’ll earn loyal customers that will become repeat spenders.

You can use a widget to do all sorts of things for your business.

Introduce a new product or service. When you combine a familiar item with a new item, it can increase a customer’s comfort in trying the new product or service. Or, include an additional related product to the new item to increase the customer’s value perception. For example, an air freshener dispenser with a few refills.
Educate your customers on your full line of products or services. Take a product or service that your customers know little to nothing about, and combine it with a popular product. Consider offering the product for free with the purchase of a main item, or attach samples to common items.
Disguise high prices. The combination of two items for a single price gives the perception of added value or a “deal” and will mask the high price of the individual items.
Influence consumer choices. Combining products can influence the brands your customer chooses to purchase on a regular basis. For example, all PC computers come with Microsoft software.
Make your customer’s life easier. Combine all the items a customer will need to use a product or achieve a result. This provides one-stop shopping and ensures all products will work together seamlessly.
Increase customer loyalty. This is when widgets help to tie your customer to your business by offering the convenience of many services from the same business. For example, insurance companies that offer car, home, travel and health insurance, or telecommunications companies that provide telephone, wireless, Internet and cable TV.
Enhance a product or service. Widgets can make products or services seem more attractive. This works especially well when combining products with services, and vice versa.

Wondering when is a good time to start using widgets in your business?

Generally, you can always use widgets to help boost your average dollar sale. However, there are a few instances where the use of widgets is especially effective:

Sufficient quantity of products being produced
Sufficient scope of products and services
Sufficient distribution routes
Profit margin is high
Customer acquisition costs are high
High volume of products or services being sold
Customers looking for a simplified purchasing experience

How do you know what to bundle together? Create an assortment of profitable widgets in your business using this easy process.

1. Make a list of all the products and services you offer, as well as the types of clients that you cater to.

This exercise is intended to get you thinking about your customers, as well as the full scope of your business. Do you offer just services? Just products? Or a combination of the two? Do you offer a single product line, or a diverse assortment of goods that are generally part of a few categories?

If you offer several thousand products, you may wish to list all the departments or types of products you offer instead of working on a detailed list.

Structure this list so that you can group the products and services that each customer type uses. You’ll be able to create more specific widgets this way, which are typically more successful than widgets that attempt to appeal to the masses.

2. Then, next to that list, write down complementary products or services that would enhance ease of use, or further meet a need.

This is where you match up your products and services, and bundle them into categories or activities. Call it your “draft widget list.”

Sometimes this is a really clear, straightforward exercise. You sell several skincare lines for specific types of skin, so you can create widgets based on each type. Or, you only sell computers and software, so you can create widgets for beginner, intermediate and advanced users.

If you find you are struggling to match items, think of services you could add to your products, or products you could add to your services. Offer delivery, home installation, assembly, maintenance, or service for free and build it in to the cost of the item. Or, offer a service program for a nominal fee.

Another way to go about this is to think of your customer, and why they come to your business. Is it to make their life easier? Meet a need? Fulfill a want? Once you have the answer, think of a widget that could further deliver what they’re looking for, or make their life easier. Think of all the steps involved in making a purchase from you – from the moment the customer walks out the door, until they’re home using what they’ve purchased. How can you use widgets to enhance that process, or make it easier?

3. Review your list, and identify potential combinations for widgets.

Based on your understanding of your target market and the various smaller groups within in, create your widgets. Keep thinking about that combinations and conveniences that would appeal to them and make their lives easier.

Get specific here, and try to create a different widget for each market segment. Widgets are successful because they seem to be personalized or custom designed to meet a specific need or solve a certain problem. They can demonstrate to your customer that you’ve thought ahead and anticipated what they might appreciate.

This is also an opportunity to market a specific product or service combination under its own brand or special occasion. Give your widget a theme! Think of holidays, how-to’s, seasons and occasions. For example, Mother’s Day gift widgets or lawn-care widgets.

Here are some of the main types of widgets that you could use for your business:

Pure Widgets. Widgets that you can’t separate are called “pure.” For example, a new car or a computer.

Mixed Widgets. Also known as custom widgets, your customer has the choice of purchasing the entire widget, or a combination of the components. A good example here are fast food restaurants – you can purchase the entire value meal, or each of the food items separately.

Add-on Widgets. An add-on item is “free” or discounted when the main item is purchased. For example, get a free car wax when you purchase a car detailing service.

Tie-in Widgets. This is similar to the add-on widget, except the discounted or “free” item is something needed to use the main product. For example, if you buy a printer, you get a discount on the ink.

Hidden Widgets. These are widgets that don’t immediately appear to be widgets. Examples would be a cross-couponing strategy (a customer receives a coupon for cheese when they buy milk) or a combination sales rebate (a rebate is offered when a customer purchases a computer, monitor and printer in one transaction).

Extended Warranties. This is become hugely popular over the last decade, and delivered sky-high profits to companies who have implemented it because profit margins are so high. The warranty extends beyond the timeframe and scope of the manufacturer, and is available for a fraction of the item’s cost. This is popular for electronics, appliances and furniture dealers.

Lifestyle Widgets. This is a widget that is put together based on a lifestyle theme, or to solve a common hassle that your target market experiences. For example, a department store could put together a widget for expectant mothers, or teenagers going back to school.

4. Ensure each widget is priced strategically, and is profitable.

It is essential that your widget appear to the customer as though it is a higher value for less money than if they bought the individual parts separately.

This won’t literally always be the case. If the act of purchasing all items (or services) at the same time is a much simpler endeavor than buying them individually, it is likely that your customers will pay more for convenience.

On the back end, there are no hard and fast rules about how to combine and price your products and services. It’s a matter of coming up with a widget you think works, and then running the numbers based on your profit margins and cost. If do decide to take a hit on your margins to drive traffic or move product, make sure you know at what point you will break even and begin to make money.

Widgets provide a win-win opportunity for you and your customers – you boost your average sale, and they benefit from added convenience and value.

There’s really no end to the number of possible combinations you can offer your customers. Just remember to stay in the mindset of your target audience, and create widgets that they will perceive as valuable, useful or convenient.

Again, the purpose of widgets is to drive your average dollar sale and to make you more money. If packaging two items together requires too great a reduction in your profit margin, you’re going to lose money in the long run and your strategy won’t be successful. Run the numbers, and plan for your success!

In the next E-Class we’re going to spend some time writing ads that sell as well as a popular low-cost form of advertising – the classifieds.

Looking forward to it!