Differential Effectiveness of Discounts in Product Bundles

Uzma Khan, Carnegie Mellon University
Ravi Dhar, Yale University
We examine whether a discount on certain items in the bundle is more effective than an equivalent discount on other items when the bundle contains both hedonic and utilitarian components. Five experiments show that bundle purchase is more likely when a discount is offered on the hedonic item rather than on the utilitarian item or the bundle. We explain that a discount provides a justification that increases the likelihood of hedonic purchases but has little impact on utilitarian consumption as it faces lower disutility. Our proposition is hard to reconcile with the economic notion of fungibility of money. However, the reasoning is intuitive if saving on hedonic items is psychologically more rewarding than saving on utilitarian items.
[ to cite ]:
Uzma Khan and Ravi Dhar (2008) ,"Differential Effectiveness of Discounts in Product Bundles", in NA - Advances in Consumer Research Volume 35, eds. Angela Y. Lee and Dilip Soman, Duluth, MN : Association for Consumer Research, Pages: 138-141.