Behavioral Perspectives on Bundling Research

Citation:

Rajan Krish, Pallab Paul, and Joydeep Srivastava (1994) ,"Behavioral Perspectives on Bundling Research", in NA - Advances in Consumer Research Volume 21, eds. Chris T. Allen and Deborah Roedder John, Provo, UT : Association for Consumer Research, Pages: 255.

Advances in Consumer Research Volume 21, 1994      Page 255

BEHAVIORAL PERSPECTIVES ON BUNDLING RESEARCH

Rajan Krish, University of Arizona

Pallab Paul, University of Denver

Joydeep Srivastava, University of Arizona

Bundling is a pervasive practice in the marketing of products and services. It is the strategy of marketing two or more products and/or services in a single "package" under a single price tag (Guiltinan 1987). The theoretical issues underlying bundling strategies span both the psychology and the economics of consumer value perception. Conceptual insights and empirical evidence on these issues will be useful for understanding more operational questions such as how a specific set of component products should be bundled, presented and priced; how the specific bundle may be evaluated by consumers; the types of bundles that may be the most appealing (e.g., whether or not the component products should be complementary); and how specific consumer characteristics (e.g., expertise and knowledge in the product category) might affect consumers' evaluation of a bundle. Thus the aim of the session was to understand bundling from a behavioral perspective. The session was developed around a set of three papers that broadly examined the effects of bundle type, perceptions of savings, task framing, alternative information presentation formats, and consumer characteristics on consumers' perception of the value of the bundle.

The first paper by Harlam, Krishna, Lehmann, and Mela (1993) examined bundling issues such as the types of products that should be bundled together and the price that should be charged in the context of both durable and non-durable products. Their results indicate that different ways of presenting economically equivalent bundles affect consumers' evaluation of the bundle and consequently purchase intent. They also examined the effect of consumer familiarity with the bundle on the evaluation of the bundle itself. They report that more familiar consumers react differently to the presentation of equivalent bundles than less familiar consumers. Further, more familiar consumers have a higher purchase intent for lower priced bundles than less familiar consumers.

The second paper by Kaicker, Bearden, and Urbany (1993) reported the findings of an experiment that examined the effect of perceived savings of bundle components on overall perceptions of bundle value. Specifically, increasing savings on the focal item increased not only consumer perceptions of value for the focal item, but also increased perceived value for the additional item as well as for the bundle, overall. Similarly, the findings showed that increased savings on the additional item increased perceptions of value for the bundle, but did not affect the perceived value of the focal product. The results indicated that the perceived value of the incremental item and the incremental cost were significant determinants of the perceived value of the focal item and of the overall bundle.

Chakravarti, Krish, Paul, and Srivastava (1993) reported the findings of three experiments which examined how differential bundling and framing of choice alternatives influence judgments and choice. They extended and tested Thaler's (1985) normative principles for integrated and segregated presentation of multiple gains and losses. Their results suggest that segregated presentation of bundle components is preferred to consolidated presentations but that segregation/integration effects on combined value judgments are moderated by the nature of the components involved. Thus, a segregated warranty may make the risk of product failure salient whereas a segregated accessory such as an icemaker may make add-on value more salient. This would produce differential effects on perceived bundle value and choice outcomes. The results thus suggest that the presentation and framing of product and service bundles may influence the salience of product features and consequently consumers' perceived value and choice.

The session concluded with discussant's comments from C. W. Park. He provided a framework integrating the three papers and discussed avenues for future research. Noting that each of the three papers in the session focused on price as the bundling device, he called for research examining bundling approaches using other marketing mix elements (e.g., advertising).

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