When 2 Plus 2 Equals 5

Is it possible to sell products as a group to increase total sales? P&G and Gillette think so, which is part of the reason that P&G acquired Gillette in 2005. The Pro-Health line of products combines Gillette’s Oral-B toothbrush line with P&G’s Crest toothpaste. Here’s the theory: Consumers often buy hair-care or skin products in groups, if the products are expected to work together. P&G is trying the same approach in the oral-care market. Why not buy the toothbrush for use with a specific toothpaste? According to an article in the 4/24 Wall Street Journal, “The line was aimed as consumers willing to pay more for products that touted health benefits, as opposed to flavor or cosmetic appeal”. In fact, these two products have been grouped for display ads in Wal-Mart stores.
Consider the financial implications: Assume an Oral-B toothbrush generates a 15 cent profit per unit and the Crest toothpaste 10 cents per unit (25 cents total). P&G decides to spend 5 cents per unit to market the products together. If the profit on the combined items is more than 30 cents, P&G’s profit per unit is higher (ie: 30 cents less the 5 cents per marketing). “Bundling” products has created more value in the eye of the consumer, and they are willing to pay more. 2 plus 2 may equal five- at least in the mind of the customer.

The Lesson: Every business should consider if selling products as a group will generate more sales overall. For example, does your product require another product to be used properly? One example might be house paint and brushes or rollers. If customers normally buy both products, consider pricing the goods so that the total profit is higher than if they were sold separately.
(Source: "Merger Challenge: Unite Toothbrush, Toothpaste", Wall Street Journal, 4-24-07)