New trends in the tax industry sometimes give the companies at the forefront an advantage over their competitors. However, blindly following trends can get you in over your head and ruin your business if you don’t consider the ramifications and go about it correctly.
Bundling tax services is a trend that could make or break your business, depending on how you implement it. So, what do we mean by bundling services? And what are the pros and cons of adopting that practice in your business?
Like any fast food chain can tell you, you can make more sales by bundling two products for a cheaper price than you can get them separately. Buying a burger, fries, and drink individually will cost more than a meal deal.
The strategy is to upsell to every customer, hoping they will buy multiple products simultaneously. The individual profit margin may be smaller. Yet, if enough customers buy the deal, you can make up the difference by selling more products than ever before.
Pros of Bundling Services
Here are six of the benefits of bundle pricing for professional tax preparers:
1. Increased Overall Revenue
With bundles providing more value for less money, pricing encourages clients to buy additional services they might not have otherwise. Your profit per customer increases, which adds up.
2. Greater Market Share
Customers perceive you as providing more service for their money with a bundle, which may draw customers from other businesses. If you deliver service as promised, you can keep the new clients happy, giving yourself a competitive edge over others in the industry.
3. Predictable Pricing
By bundling instead of giving an hourly rate, the customer knows exactly what their investment will be. Clients with tight budgets are more likely to choose services where they know what they will pay beforehand. This is particularly valuable to individual households, small businesses, and startups. It also helps simplify billing.
4. Customer Retention
Clients frequently prefer staying with a company that offers bundles of various necessary services so they don’t have multiple contacts, businesses, and bills. For some, the convenience will be the biggest draw, even if your prices are slightly higher than a competitor’s.
5. Niche Selling
You can specialize and offer services targeted at a specific group. Your clients are more likely to go with a company offering bundles tailored to their needs, so they’re not paying for services they don’t want. For example, if you have S corp tax software, you can advertise directly to S corporations, maximizing your advertising budget by getting laser-focused on the right audience.
6. New Product Or Service Launch
To get the word out quickly about new services or products, you can include them in packages, making people more likely to try them. If you nail the extra service, you’ll quickly gain positive reviews, encouraging other buyers. For example, using accounting tax software with bank products for tax preparers allows you to offer bank product services to your clients as part of a bundle.
The Bundling Service Cons
However, there are downsides. The most significant consideration is you can lose money if you don’t implement the bundle system correctly. Here are some factors you need to consider before implementing service bundles:
1. Customer Preference
Some customers prefer the a la carte approach because they only need a specific service. For these customers, it is helpful to have the option to choose services separately.
For some, the cost reflects the value. A bundle discount means lesser quality services. You will need to discern which category your specific clientele falls into.
Deciding how much to charge for a specific service can be challenging, especially if you’ve been operating on an hourly-rate system. Pricing is a balancing act between showing the value of the service and charging the customer an amount that makes them feel like they got a deal. You need to make a profit, but working with some clients takes longer than others, so the price must reflect the average, or you must have different bundles based on complexity.
4. Unforeseen Profit Loss
If your operating costs increase, it can cost more to produce the same results. Examples would be a raise in your office rent or utilities, software subscription increases, or you need new equipment, etc. Do you absorb the cost or risk alienating clients by raising the price of packages?
It may be challenging to convey the importance of certain services, especially in an advertisement, if the client is unfamiliar with the term or service. If you have a newsletter or other way to communicate with clients, you may write articles highlighting different services and showing which packages include that service.
While bundling can be a game changer for your business, it does come with risks. Only you can say for sure if this approach is suitable to your business and client base. Use the above lists to assess the best strategy for your success.