Emerging Issues in Product Bundling



Citation:

Michal Ann Strahilevitz (1994) ,"Emerging Issues in Product Bundling", in AP - Asia Pacific Advances in Consumer Research Volume 1, eds. Joseph A. Cote and Siew Meng Leong, Provo, UT : Association for Consumer Research, Pages: 79.

Asia Pacific Advances in Consumer Research Volume 1, 1994      Page 79

EMERGING ISSUES IN PRODUCT BUNDLING

Michal Ann Strahilevitz, University of Illinois at Urbana-Champaign

Product bundling has become a very common phenomenon in the marketplace. The variety of bundling strategies appears almost endless. These include offering "more of the same" (e.g., buy three, get one free), bundling a product with a complementary item (e.g., free film with the purchase of a camera), offering something totally unrelated (e.g., a chance to win a Hawaiian vacation with the purchase of a microwave), bundling a product with a discount (e.g., buy one suit and receive the second suit for half price), bundling products with donations to charity (e.g., a percentage of the price of this product will be contributed to the World Wildlife Fund), and bundling transactions together (e.g., trading in an old car for a new one). The purpose of this session was to offer new insights into how consumers go about evaluating various types of product bundles. The papers presented draw on previous work from several areas of research including behavioral decision theory, information processing, and the role of affect in consumer behavior. Yet, while each of the three papers presented is grounded in theory, each concludes with a discussion of marketing implications.

The first paper, by Dipankar Chakravarti, Rajan Krish, Pallab Paul, and Joydeep Srivastava, explores how bundled versus unbundled transactions with differentially priced component transactions can influence consumers' perceptions of transaction fairness, judged desirability, and choice. In their research, the authors used a scenario involving the purchase of a new car along with the trade-in of an old car. These component transactions were either presented as a bundle with a single net price tag for the transaction, or as segregated propositions with four different sets of separate prices for the new car and the trade-in (same net price as the bundle). These five presentations were crossed with a factor involving the absence/presence of reference prices for the component transactions (i.e. the new and the old cars). The price levels were chosen so that the reference price comparisons would result in the component transactions being coded as gains, losses, or neutral. The results show systematic and theoretically consistent variations in fairness perceptions, desirability judgments, and choice of a target option as a function of how the transactions were presented (bundled/unbundled) and priced.

The second paper, by Michal Strahilevitz and John Myers, focuses on the bundling of products with promised contributions to charity. The research presented examined how the type of altruistic incentive being used, the magnitude of that incentive, and the nature and value of the product being promoted all interact to determine the effectiveness that a given altruistic incentive will have in promoting a given product. Dependent measures taken included both stated preference and actual purchase behavior. The results obtained suggest that, under certain conditions, bundling a donation to charity with a product may be even more effective than offering the cash equivalent in the form of a discount. The findings also suggest that altruistic incentives will be relatively more effective in promoting products perceived as "frivolous luxuries" (e.g., a hot fudge sundae), than in promoting products perceived as "practical necessities" (e.g., a box of laundry detergent). Finally, the data indicate that the effectiveness of altruistic incentives may be much less sensitive to magnitude (i.e., how much is being contributed) than are monetary incentives (i.e., how large is the rebate).

The third paper, by Jeanne Munger and Kyle Zolner, explores perceptions of promotional price information under conditions using different bundling formats. The research used to examine this issue consisted of an experiment with a 2 X 3 between subject (original price information format X discount format) factorial design. Students were asked to assess alternatives including price and option information for a new car that they might consider purchasing upon graduation. The original price information was either partially bundled (providing original selling price information for option "packages"), or completely unbundled (providing original price information for each of the individual items in the bundle). The discount formats consisted of 1) a rebate off the total bundle, 2) equal percentage reductions off all bundle components, or 3) two free options. Each of the three discount formats represented a total reduction of equal magnitude. Results of this study suggest that the various formats differ in terms of their long and short term advantages and disadvantages.

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Authors

Michal Ann Strahilevitz, University of Illinois at Urbana-Champaign



Volume

AP - Asia Pacific Advances in Consumer Research Volume 1 | 1994



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