Special Session Summary Emerging Issues in Product Bundling

Citation:

Michal Ann Strahilevitz (1995) ,"Special Session Summary Emerging Issues in Product Bundling", in NA - Advances in Consumer Research Volume 22, eds. Frank R. Kardes and Mita Sujan, Provo, UT : Association for Consumer Research, Pages: 587.

Advances in Consumer Research Volume 22, 1995      Page 587

SPECIAL SESSION SUMMARY

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 the product with a complementary item (e.g., free film with the purchase of a camera), offering something totally unrelated (e.g., a promised donation to the March of Dimes with the purchase of a submarine sandwich) 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. While each of the papers presented was grounded in theory, each presentation concluded with a discussion of implications for marketers interested in optimizing their product bundling strategies.

The first paper by Rajneesh Suri and Kent Monroe examined how consumers' perceptions of bundle savings are influenced by their purchase plans. More specifically, consumers may plan to buy none, one, or more than one item in a product bundle prior to being aware of the bundle offer. The research presented used a 3 (purchase plans) x 3 (bundle price) x 3 (savings on unplanned purchase) between subjects design. The results suggest that purchase plans do influence the perception of savings on bundle offers. Furthermore, the results suggest that the perception of savings and the process used to evaluate the savings on the bundle may be moderated by the relative price of the planned purchase vis-a-vis the unplanned purchase.

The second paper by Michal Strahilevitz and John Myers focused on the bundling of products with promised contributions to charity. The research presented consisted of three lab experiments and one field study. The studies investigated how the nature of the product being promoted and the magnitude of the promised donation to charity relative to the product's price interact to determine the effectiveness that a given donation to charity incentive will have in adding value to a given product. Dependent measures taken included both stated preference and actual purchase behavior. The results suggest that charity 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). The data also indicate that the effectiveness of altruistic incentives may be much less sensitive to magnitude (i.e., how much was being contributed) than are monetary incentives (i.e., how large was the rebate). Finally, the results suggest an interaction between product type (i.e., "frivolous" or "practical") and percentage of price being contributed to charity (e.g., 5% or 50%).

The third paper by Irwin Levin, Gary Gaeth, and Larry Menke focused on how consumers process information leading to judgments about product bundles. The research used a variety of response measures, comparing responses to individual products with responses to bundles consisting of specific combinations of these individual products. The results suggest that judgments of the monetary worth of product bundles are governed by an adding process; with the judged overall worth of a bundle being a function of the sum of the judged worths of its component parts. In contrast, evaluations of product bundle quality appear to be governed by an averaging process; with the relative impact of a tie-in product on quality perception often being far greater than its monetary value would suggest. This last result was especially pronounced for product classes with which the subjects were unfamiliar.

The fourth paper by Dipankar Chakravarti, Rajan Krish, Pallab Paul, and Joydeep Srivastava explored how bundled versus unbundled transactions with differentially priced component transactions can influence consumers' perceptions of transaction fairness, judged desirability, and choice. 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 findings showed 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.

While there was no formal discussant for this special session, it ended with a lively discussion which focused not only on the content of the papers presented, but on directions for future research as well.

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