Premium Positioning with Stealth Bundle Architecture

Document Version: 1.0 Created: February 5, 2026 Research Sources: 5 parallel market research agents analysing competitor pricing, bundle psychology, tier premiums, size gaps, and value anchoring Purpose: Define pricing architecture for bedhead cushions, covers, and checkout-only bundles

Executive Summary

The Pricing Transformation

Key Findings from Market Research

1. Your $10 size gaps are too narrow. Australian premium brands use $30-65 gaps (8-18% increases). Bed Threads: $50 gap. IN BED: $30-65 gaps.

1. King buyers will pay more. Material costs justify ~15% premium; research shows 18-20% is accepted. King bed owners are self-selected as higher-income, less price-sensitive.

1. Pattern/ruffle premiums are standard. Adairs charges 15-30% more for patterned cushions. Pottery Barn charges 20-50% more for statement trims.

1. Bundle discounts of 15-20% are optimal. Higher discounts erode brand value; lower discounts don’t convert. Checkout-only bundles protect public pricing.

1. Post-purchase upsells convert at 4-10%. Order bumps at checkout convert at 37%. These are your stealth bundle opportunities.

Part 1: COGS Foundation

Current Cost Structure

Bedhead Cushion (Full)

Add-On Products

Margin Analysis by Price Point

Key insight: Higher price points have disproportionately higher margins because CAC is fixed per customer.

Part 2: Size-Based Pricing

The Problem with Current Pricing

Current: $379 (Double) → $389 (Queen) → $399 (King)

Competitor Size Gap Analysis

Your gaps are 3-8x narrower than competitors.

Recommended Size Pricing

Base Tier (Classic - Solid Hemmed)

Why This Works

1. $349 Double - Psychological entry under $350, captures Renter Upgrader persona (25-38, “invests in portable styling”)

1. $399 Queen - Round number anchoring, most popular size, perceived “best value”

1. $449 King - 29% premium over Double (vs current 5%), aligns with Intentional Homeowner persona (45-54, “willing to pay full price”)

Revenue Impact Projection

Assuming historical size mix: 48% King, 42% Queen, 10% Double (from FINANCIAL-OPERATIONS-2026.md)

At 350 units/year target: +$8,365 additional revenue from size repricing alone.

Part 3: Tier-Based Pricing

The Three Collections

Based on your preview page structure:

Market Research: Tier Premiums

Recommended Tier Pricing

Full Cushion Pricing Matrix

Tier Premium Breakdown

Why A-B Side Commands Highest Premium

• Two looks in one - Customer perceives double value
• More complex construction - Slightly higher COGS (~$10)
• Premium positioning - “Designer” aesthetic
• Aspirational - “I can change my room’s vibe”

Cover-Only Pricing Matrix

Covers priced at ~45% of full cushion (down from current ~50%) to encourage repeat purchases.

Cover Strategy Rationale

At 45% of cushion price:

• Full cushion still clearly better value (get insert “for only ~$200 more”)
• Covers accessible enough for seasonal refresh purchases
• Creates recurring revenue stream (“razor blade” model)
• Historical data shows 0% repeat rate - covers priced to change this

Part 4: Stealth Bundle Strategy

The Strategic Constraint

From COMPETITOR-STEALTH-STRATEGY-2026.md:

“Don’t compete with ilovelinen and selah+stone. Let them compete with each other in bedding while you dominate the bedhead cushion niche they’ve completely ignored.”

Therefore: Bundles with pillowcases and duvet covers must NOT be advertised publicly. They exist only at checkout to capture incremental revenue without positioning Arlem as a “bedding brand.”

Bundle Architecture

Bundle Type 1: Cover Add-On (Checkout Upsell)

Trigger: Customer adds full cushion to cart Offer: “Add a spare cover and save”

Implementation: Order bump checkbox at checkout Expected conversion: 20-37% (based on research)

Bundle Type 2: Matching Pillowcases (Post-Purchase Upsell)

Trigger: Customer completes cushion purchase Offer: “Complete the look with matching pillowcases”

Pricing rationale:

• COGS: $18 (2x $9)
• RRP: $89-109 (aligned with Bed Threads at $70-90, IN BED at $100-135)
• Post-purchase: $69-89 (20% off, still 74-79% margin)

Implementation: One-click post-purchase offer (no re-entry of payment) Expected conversion: 4-10%

Bundle Type 3: Matching Duvet Cover (Post-Purchase Upsell)

Trigger: Customer completes cushion purchase (King size only) Offer: “Get the matching duvet cover”

Pricing rationale:

• COGS: $80
• RRP: $299-349 (below Bed Threads at $250-280, premium over I Love Linen at $290-345)
• Post-purchase: $249-289 (17% off, still 68-72% margin)

Implementation: One-click post-purchase offer Expected conversion: 4-8% (lower than pillowcases due to higher price)

Bundle Type 4: Complete Bedroom (Hidden Bundle Page)

Not advertised, but available if customer asks or discovers

Implementation: Hidden URL, mentioned only in customer service or post-purchase emails Why: Captures customers who want “the whole look” without publicly advertising bedding

Bundle Margin Analysis

All bundles maintain 60%+ margin - the discount comes from reduced CAC (one customer, multiple products) and increased lifetime value.

Part 5: Complete Pricing Architecture

Full Product Price List

Bedhead Cushions (Full with Insert)

Covers Only

Bedding (Not Advertised - Checkout/Post-Purchase Only)

Bundles (Checkout Only - Not Advertised)

Price Anchoring Strategy

On Product Pages

KING LINEN BEDHEAD CUSHION - A-B SIDE (ESPRESSO)
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

$519  Full Cushion (Insert + Cover)
      ✓ Reversible: Espresso solid ↔ Pinstripe
      ✓ Premium linen, removable cover
      ✓ Free shipping

$239  Cover Only
      Perfect for: Seasonal refresh, spare while washing

[Add Full Cushion to Cart]  [Add Cover Only to Cart]

At Checkout (Order Bump)

┌─────────────────────────────────────────────────────┐
│ ☐ ADD A SPARE COVER AND SAVE                        │
│                                                     │
│   King A-B Side Cover (Espresso)                    │
│   Individual price: $239                            │
│   Add-on price: $169 (Save $70)                     │
│                                                     │
│   "Keep a spare for when one's in the wash"         │
└─────────────────────────────────────────────────────┘

Post-Purchase (One-Click Upsell)

━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

   THANK YOU FOR YOUR ORDER!

   Complete the look with matching pillowcases.

   ┌─────────────────────────────────────────────┐
   │  King Linen Pillowcase Pair (Espresso)      │
   │                                             │
   │  Usually $109  →  $89 (Checkout exclusive)  │
   │                                             │
   │  [ADD TO ORDER - ONE CLICK]                 │
   └─────────────────────────────────────────────┘

   This offer expires in 10 minutes.

━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

Part 6: Pricing Psychology Applied

Round Number vs Charm Pricing

Research finding: For premium products, round numbers ($400) signal quality; charm pricing ($399) can signal discount brand.

However: The left-digit effect means $399 feels significantly cheaper than $400.

Our approach: Use $X49 and $X99 endings to stay below psychological thresholds while maintaining premium perception.

Adjustment for A-B Side King: Consider $499 instead of $519 to stay below $500 threshold.

The Decoy Effect

Current size pricing creates no decoy. Proposed pricing:

Psychology: King at $449 makes Queen at $399 feel like “almost the same for $50 less.” Most customers will choose Queen - which is fine, it’s our highest-volume size anyway.

The Rule of 100

For showing savings:

• Under $100: Use percentage (“Save 20%”)
• Over $100: Use dollar amount (“Save $70”)

For Arlem at $400+ price points: Dollar amounts are more effective.

Part 7: Revenue Projections

Baseline vs New Pricing

Assumptions

• 350 units/year (2026 target from FINANCIAL-OPERATIONS-2026.md)
• Size mix: 48% King, 42% Queen, 10% Double
• Tier mix: 50% Classic, 30% Playful, 20% A-B Side (estimate)

Current Pricing Revenue

New Pricing Revenue (Cushions Only)

Weighted by size mix AND tier mix:

Cushion revenue increase: +$16,647 (+12.1%)

Add-On Revenue Projections

Total 2026 Revenue Projection

Part 8: Implementation Checklist

Phase 1: Foundation (Week 1-2)

Shopify Product Updates

• Update all cushion prices (size-based)
• Create tier variants (Classic, Playful, A-B Side)
• Update cover-only products
• Create hidden bundle products (not in navigation)

Checkout Configuration

• Install/configure upsell app (ReConvert, AfterSell, or CartHook)
• Set up order bump for spare cover
• Set up post-purchase one-click for pillowcases
• Set up post-purchase one-click for duvet (King only)

Phase 2: Bedding Products (Week 2-3)

Product Creation

• Create pillowcase pair products (not in main navigation)
• Create duvet cover products (not in main navigation)
• Photograph pillowcases and duvet (match cushion shoots)
• Write product descriptions

Pricing Implementation

• Set RRP pricing
• Configure post-purchase discount pricing
• Test checkout flow end-to-end

Phase 3: Testing & Optimisation (Week 3-4)

A/B Tests to Run

• Cover add-on discount: 10% vs 15% vs 20%
• Post-purchase timing: Immediate vs 3-second delay
• Pillowcase offer: $69 vs $79
• Bundle messaging: “Save $X” vs “X% off”

Metrics to Track

• Checkout add-on conversion rate (target: 25%)
• Post-purchase conversion rate (target: 7%)
• Average order value (target: +15%)
• Customer feedback (any confusion?)

Part 9: Competitive Position Summary

Post-Implementation Market Position

Positioning Statement

Arlem sits in the “premium accessible” tier:

• Above GlamSwag (~$169-299) and Bespoke Linen (~$290)
• Below Hale Mercantile ($699-799 covers only)
• Aligned with premium quality perception
• Entry point accessible for first-timers
• Premium tier captures design enthusiasts

Appendix A: Research Sources

Competitor Pricing Data

• Bed Threads: $200-320 duvet covers, $70-90 pillowcases
• IN BED Store: $260-455 duvet covers, $100-135 pillowcases
• I Love Linen: $290-390 duvet covers, $75-90 pillowcases
• Cultiver: $350-590 sheet sets
• Adairs: $70-100 cushions
• Hale Mercantile: $699-799 bedhead slipcovers
• GlamSwag: ~$169+ bedhead cushions
• The Bespoke Linen Co: $290 bedhead cushions

Bundle Psychology Research

• Optimal bundle discount: 15-20% (Prisync, Peel Insights)
• Order bump conversion: 37.8% (Focus Digital)
• Post-purchase conversion: 14.6% baseline, 4-10%+ for home goods
• Price anchoring: Strikethrough pricing increases perceived value (Shopify)
• Rule of 100: Dollar amounts for items over $100 (Conversion research)

Size Pricing Research

• Queen→King gaps: 8-18% typical in Australian premium bedding
• King premium justified by customer segment, not just materials
• “Good-Better-Best” framework: Middle option captures 66% of sales (HBR)

Premium Tier Research

• Pattern premium: 10-15% (Adairs, I Love Linen)
• Ruffle/trim premium: 20-30% (Pottery Barn, Bedtonic)
• Reversible premium: 15-25% or positioned as value-add

Appendix B: Pricing Quick Reference

Cushion Prices (Full)

              CLASSIC    PLAYFUL    A-B SIDE
DOUBLE        $349       $379       $399
QUEEN         $399       $429       $449
KING          $449       $489       $519

Cover Prices

              CLASSIC    PLAYFUL    A-B SIDE
DOUBLE        $159       $179       $189
QUEEN         $179       $199       $209
KING          $199       $219       $239

Bedding Prices (Not Advertised)

                  RRP        POST-PURCHASE
PILLOWCASES (Q)   $89        $69
PILLOWCASES (K)   $109       $89
DUVET (Q)         $299       $249
DUVET (K)         $349       $289

Bundle Savings

BUNDLE                           SAVES
Cushion + Cover                  $59-79 (10-11%)
Cushion + Pillowcases            $40-50 (8-10%)
Cushion + Duvet                  $80-100 (12-14%)
Complete Bedroom                 $108-128 (14%)

Document Control:

Research Methodology:

• 5 parallel research agents analysing different pricing dimensions
• Web searches across 50+ sources
• Australian competitor pricing verified via brand websites
• Bundle psychology research from DTC case studies (Brooklinen, Parachute, Buffy, Casper)
• Academic research on price anchoring (Tversky & Kahneman)
• Industry benchmarks from Shopify, HBR, and pricing consultancies

“Value-driven pricing captures what customers are willing to pay. COGS-driven pricing leaves money on the table. Every King buyer at $399 is $50 of profit you’re not collecting.”