How Product Prices Affect Bundle Revenue Allocation

Overview

When you sell a bundle, the revenue from that sale needs to be split across the individual component products. SKU uses product prices to determine how this revenue is divided. This article explains how this works and why it's important to set prices for your bundle components.

How Bundle Revenue Allocation Works

When a bundle is sold, SKU doesn't keep the revenue assigned to the bundle itself. Instead, it splits the revenue across the component products based on their relative prices.

Example

You have a bundle called "Starter Kit" that contains:

• Widget A (quantity: 2) - Price: $30
• Widget B (quantity: 3) - Price: $20

A customer purchases the Starter Kit for $100 on your sales channel.

How SKU calculates each component's share:

1. Calculate weighted prices:

   • Widget A: 30×2=60
   • Widget B: 20×3=60
   • Total: $120

2. Calculate each component's percentage:

   • Widget A: 60÷120 = 50%
   • Widget B: 60÷120 = 50%

3. Apply to the actual sale amount ($100):

   • Widget A gets: 100×5050** (split across 2 units = $25 each)
   • Widget B gets: 100×5050** (split across 3 units = $16.67 each)

This allocation is used for:

• Product-level revenue reporting
• Gross profit calculations per product
• Sales performance analysis by SKU

What Price Does SKU Use?

SKU uses the price from your default pricing tier. This is typically called "Retail" and is marked as the default in Settings → Pricing Tiers.

The price is set on each product's Pricing tab and represents your standard retail price for that product.

Note: The bundle's selling price comes from your sales channel (Amazon, Shopify, etc.). The component prices in SKU are only used to calculate the ratio of how to split that revenue.

What Happens When Prices Are Not Set

Scenario 1: All Component Prices Are $0

If none of your bundle components have prices set, SKU falls back to using unit costs instead of prices to calculate the split.

• If unit costs are available, the revenue is split based on cost ratios
• If unit costs are also 0,thecomponentsmayreceive0 revenue allocation

Scenario 2: Some Components Have Prices, Others Don't

If only some components have prices set:

• SKU counts how many components have prices vs. costs
• If more components have costs than prices, SKU uses cost-based allocation for all components

This can lead to unexpected revenue splits that don't reflect the actual value contribution of each component.

Scenario 3: Prices Don't Reflect Value Proportions

If your component prices don't reflect their relative value within the bundle, your product-level reporting will be skewed.

Example of a problem:

• Component A: Price $10 (but it's the main product)
• Component B: Price $50 (but it's just an accessory)

In this case, Component B would receive 5× more revenue allocation than Component A, even though Component A is the primary product customers are buying.

Best Practices

1. Always Set Prices for Bundle Components

Ensure every product that appears as a bundle component has a price set in the default pricing tier. This guarantees consistent, price-based revenue allocation.

2. Set Prices That Reflect Relative Value

Your component prices should reflect what each item would reasonably sell for individually, or at least their relative value within the bundle.

If you don't sell components separately, consider:

• What would you charge if you did sell them separately?
• What portion of the bundle's value does each component represent?

3. Review Bundles After Price Changes

If you update component prices, be aware that future bundle sales will use the new ratios. Historical sales retain their original allocation.

4. Use Consistent Pricing Across Similar Products

If you have multiple bundles sharing the same components, consistent component pricing ensures comparable reporting across all bundles.

How to Set Product Prices

1. Navigate to Products in the main menu
2. Click on the product you want to update
3. Go to the Pricing tab
4. Find your default pricing tier (usually "Retail")
5. Enter the price and save

You can also bulk update prices via CSV import.

Frequently Asked Questions

Q: Does the product price affect what customers pay?

No. The price customers pay comes from your sales channel (Amazon, Shopify, etc.). The product price in SKU is only used for internal calculations like bundle revenue allocation.

Q: What if I sell the same product in multiple bundles?

The same product price is used regardless of which bundle it's in. The revenue allocation is calculated fresh for each bundle sale based on that bundle's specific components and quantities.

Q: Does this affect my inventory costs?

No. Inventory costs (COGS) are calculated separately using your actual purchase costs and FIFO layers. Product prices only affect revenue allocation for bundles.

Q: What about kits?

Kits work differently from bundles. When you assemble or disassemble kits, SKU uses unit costs (not prices) to allocate value to components. However, if you sell a kit's associated bundle, the same price-based proration applies.

Summary

Setting accurate prices for your bundle components ensures your product-level revenue reporting reflects the true value contribution of each item in your bundles.