Want Loyal Customers? Consider Assembling a Super Bundle
Three key ways that brands are deploying super bundles to enhance customer loyalty
Super Bundle refers to the business strategy of bundling together multiple types of media and services across industry verticals, often as a way to provide easy access to brand offerings and drive customer loyalty. While bundling is a common business strategy that goes back to the early days of cable TV, super bundle is considered an innovation territory by us here at the Lab, because it is a cross-category bundle that often benefits from an ecosystem-wide monetization of consumer attention and data.
Prominent in-market examples of super bundles often work as subscription-based membership programs, such as Amazon Prime and Walmart+, that promise all-inclusive access to a wide range of services and members-only perks at one simple price, in contrast to conventional loyalty programs that limit certain perks and services to various tiers of membership earned by a set amount of spending on purchases.
As the most popular super bundle in the U.S. market today, Amazon Prime is set to infiltrate about 61% of US households in 2023. Another 2017 survey by investment bank Piper Jaffray found that among U.S. households with an annual income over $112,000, 82% of them are in possession of Amazon Prime memberships.
As the closest super bundle offering to Amazon Prime, Walmart+ covers perks from fast shipping to gas station discounts. It was notably missing a content streaming service a la Prime Video, which Walmart amended in August 2022 by partnering with Paramount+ to offer subscribers free access and increase its bundling appeal.
Walmart has not publicly shared how many Walmart+ subscribers it has amassed since the bundle’s launch in September, 2020. But recent estimates by Consumer Intelligence Research puts the membership count for Walmart+ at around 11 million in the past three quarters, which translates to about 25% of Walmart’s online shoppers. This number was roughly corroborated by an earlier estimate by Deutsche Bank in September, which pegged Walmart+’s subscriber base at 32 million U.S. households (about 24.2% of all U.S. households).
Both Prime and Walmart+ use the various perks they offer as a lead generation tool that also doubles as a customer retention tool. Becoming a member makes people more likely to shop on their respective sites. Studies have found that Prime members typically spend double the amount of non-Prime members on Amazon. Meanwhile, Walmart+ captures 18.5% of their subscribers’ share of wallet, higher than 14.6% of Walmart’s total shoppers’ share, per tracking data from Numerator. Those numbers are strong evidence that super bundles are a great way to drive spending and build customer loyalty.
Besides these two major super bundles, there are a handful of other notable subscription-based membership programs that are taking a similar approach to bundle together services that are not conventionally sold together. For example, Lyft Pink not only includes reduced fares for on-demand rides, it also includes free Sixt car rental upgrades, a free GrubHub+ membership for discounts on food deliveries, and roadside assistance for your own car up to four times every year. Uber One offers similar benefits with additional UberEats discounts on local grocery deliveries, which Uber recently added.
Consumer loyalty has been growing fickle as consumers face increasing uncertainties. 35% of U.S. consumers have tried a new brand during the pandemic, with the top three reasons behind switching being value, availability, and convenience, per a McKinsey study. Overall, super bundles can be great at driving lifecycle loyalty in three major ways:
1. Mitigating Subscription Fatigue
It is no secret that after years of rapid growths of subscription-based services, fatigue is starting to set in among many consumers. Even though subscribers are watching more content than before, 35% of them are likely to unsubscribe from a service in the next 12 months, per Simon-Kucher’s 2022 Global Streaming Study. Moreover, with FAST (free, ad-supported streaming) services on the rise, many viewers are turning to free services instead of signing up for new paid services.
Fear of an economic downturn is also impacting consumer sentiments on subscriptions. Although research shows that media subscriptions are usually the last thing people would choose to cut since they are typically considered essential services, even category leader Netflix is feeling the pressure, especially after having lost more than 1,000,000 subscribers in the first two quarters of 2022.
Super bundle can be a way for companies to mitigate the growing subscription fatigue. One way Netflix is dealing with this is to expand into gaming, adding mobile game titles to its service at no extra cost. This effectively turns Netflix’s subscription into a home entertainment bundle of TV, movie, and video games, as the company hopes a bundle of diversified offerings can be more appealing to subscribers while it keeps raising its pricings.
2. Bundling as Ecosystem Lock-In
Super bundle is also a killer tactic to facilitate ecosystem lock-in, arguably one of the strongest ways to ensure lifecycle loyalty in the digital realm, given that they typically provide all-inclusive access to a company’s full stack of services for a neat monthly fee.
Apple One is a good example of using a multi-service bundle to lock in users and discourage switching. Although all the Apple services included are tied to content distribution in one way or another (even iCloud+ is primarily about content as most will benefit from that in terms of photos), The strategic value attached to Apple One is to get iPhone users to think of the Apple ecosystem in terms of a monthly cost, which opens the door to the possibility of Apple eventually adding hardware subscriptions to the Apple One bundle, which would further accelerate the average device upgrading cycles.
Even without the hardware component, Apple’s services have been growing popular among users. In its latest earnings call, the company shared that it now has over 900 million paid subscriptions across all of its services. In fact, Apple now generates more revenue from its services ($19.2 billion) than from selling iPads ($7.17 billion) or Macs ($11.51 billion). The more Apple services an iPhone user gets used to using, the less likely it is for them to switch to Android.
Similarly, in the world of media bundles, Disney leads the pack with a wide range of offline services and products, from theme parks and themed hotels to merchandises, that it would slowly incorporate into its existing media bundle to further lock in fans and households. Disney CEO Bob Chapek already shared that the content you watch on Disney Plus could one day influence your experience at the company’s parks, so we may not be far from Disney+ expanding into a true cross-category super bundle that enables Disney to deliver personalized customer experiences in an omnichannel, data-driven manner.
It is interesting to note that ownerships of some super bundles are not mutually exclusive in their lock-in effects — 73% of Walmart+ subscribers are also subscribers of Amazon Prime, per tracking data from Numerator, but only 11% of Amazon Prime households have Walmart+. The
households that have subscriptions to both bundles obviously have more flexibility in terms of where they shop, but at the same time, they also further insulate those households from buying from elsewhere.
3. Vertical Integration of Services
Lastly, super bundles can also be a powerful way to facilitate vertical integration and reinforce loyalty by offering customers more services. The aforementioned Uber One and Lyft Pink bundling non-ride service perks into their subscriptions can be seen as a way to encourage users to check out their non-core services as well.
Another prime example of super bundle as a vertical integration tool is Lululemon’s new fitness membership program, which the athleisure apparel company recently launched following its acquisition, and subsequent rebranding, of Mirror. This marks a significant move for the brand to fully embrace a lifestyle-oriented brand extension through a fitness-oriented subscription bundle.
Besides selling the Mirror (now renamed Lululemon Studio) at half the cost of a Peloton bike, Lululemon is bundling in other perks into its digital workout subscription service, such as 10% off almost all Lululemon purchases and free in-person fitness classes at select Lululemon stores. Interestingly, the $39 per month subscription will also give subscribers 20% off fitness classes at any of Lululemon’s eight new gym partners, which effectively make Lululemon Studio an aggregator and customer acquisition channel for these gyms, while also extending its offer into the offline world.
In conclusion, super bundle is a great innovation tactic for enhancing customer loyalty by mitigating subscription fatigue, strengthening ecosystem lock-in effect, and facilitating vertical integrations. While not every company has the right assets to pull off a super bundle alone, the Walmart / Paramount tie-up validates partnership as a viable path to building bundles.
With the rise of unconventional subscriptions for offline services such as flights, fast food, and healthcare services, consumers are only going to be confronted with even more choices that may result in paralysis. Yet, all these unusual subscriptions could be candidates for platform owners to create future super bundles via cross-category partnerships.