Raj arora

Bundling or unbundling frequently purchasedproducts: a mixed method approach

Raj Arora

University of Missouri-Kansas City, Overland Park, Kansas, USA

AbstractPurpose – This paper aims to use a mixed method (qualitative and quantitative) approach to exploring the effectiveness of price bundling.Design/methodology/approach – The study is based on a concurrent, two-studies design where quantitative and qualitative data are both collected(concurrently or sequentially) and analyzed separately. The first study is based on a nested experimental design, and the second study is based on in-depth interviews. The setting for the study is frequently purchased products, specifically teeth-whitening products. The bundled items are: teethwhitener, toothpaste, mouthwash, toothbrush and dental floss. Various forms of discounts are tested to assess the effectiveness of bundles. Whilebundling has been investigated in marketing settings, the focus has been limited to consumer durables using quantitative scales. The experimentalstudy is followed by a qualitative investigation in order to add further insight into the consumer’s choice of a bundle. This mixed method approachprovides rich narrative that adds important insights about the decision process and offers suggestions for advertising development.Findings – The findings do not support a bundling approach. Although the consumers perceive higher value of the bundle, the attitudes, intentions andnarratives support promoting these items individually rather than as a bundle.Research limitations/implications – Caution is advised in extrapolating the results beyond the issues investigated in the study.Practical implications – The findings suggest caution for marketers in designing product bundles, positioning, and promotion strategies.Originality/value – There are three major contributions of this study. First, the current literature suggests price bundling is an effective strategy. Thisstudy suggests that for certain products bundling may not be effective. Second, the past literature has not investigated the influence of type of discounton effectiveness of a bundle. Third, most studies in price bundling are quantitative in nature. This study uses a mixed method approach. The quantitativestudy is followed by a qualitative study to add further insights that will help understand consumer motivations behind the preferences.

Keywords Discounts, Price positioning, Dentistry, Product design, Product mix, Consumer behaviour

Paper type Research paper

An executive summary for managers and executive

readers can be found at the end of this article.

Introduction

Price bundling is an important area in marketing. While price

bundling is frequently used by marketers, its effectiveness

needs more research especially for different product

categories. The intent of price bundling is to increase sales

by offering a discount when a pre-specified bundle of items is

purchased at the same time. Usually, the additional items in

the bundle are those that are complementary to the main

product. For buyers, the total cost of purchasing these items is

less than the cost of purchasing these products individually.Stremersch and Tellis (2002) elucidate the distinction

between product bundling versus price bundling. They define

price bundling as the sale of two or more separate products in

a package at a discount. Product bundling refers to the case

where the bundled products are offered without any discount.

Thus, bundling products without a price discount may not

add any real value to consumers.

Sometimes price bundling is used as a temporary price

adjustment to the main product. This is often the case when

marketers are reluctant to make price adjustments on the

main product for fear that doing so may affect the product’s

perceived quality. So, marketers choose to offer adjustments

on other related or complementary products. Consider the

message: “Buy the digital camera and get the color printer

free.” With this approach the marketer is making a priceadjustment without the perception of lowering the price of the

main product, the digital camera.There are several different variations of price bundling.

Pure component pricing refers to the case of pricing and

offering each item individually. Pure bundling refers to

offering a fixed bundle of goods to the buyer for a given price.

One example would be offering a preconfigured computerand a specific printer for a fixed price. Mixed bundling refers

to a case where the buyer may choose to purchase the bundle

or purchase individually priced items.While price has a direct impact on purchase intentions, its

effectiveness may be mediated by the form of discount,

namely coupons, gift card, instant discount, etc. This form of

discount has not been studied in marketing and is investigated

under the topic of type of discount.

Product setting

The setting for this investigation is the teeth whitening

products. A few years ago, tooth whitening was considered a

cosmetic procedure, something to be done at a dentist’s office.

Now, casual reading of magazines or watching television

commercials indicates that teeth whitening products are

entering the mainstream of acceptance by consumers. Once

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0736-3761.htm

Journal of Consumer Marketing

28/1 (2011) 67–75

q Emerald Group Publishing Limited [ISSN 0736-3761]

[DOI 10.1108/07363761111101967]

67

considered an option, it is now simply a “way of life.” The

teeth whitening products had their origins in the dentist’s

office; they are now accepted as “at home” products.As the market for teeth whitening products grows, so does

the variety of teeth whitening products. For example, Crest’s

most popular Whitestrips is now joined by Night Effects.

According to Sensational Smiles, one of the manufacturers

of teeth whitening product, the teeth whitening industry

grossed over 11 billion dollars worldwide in 2007

(www.sensationalsmiles4u.net/about.html). The increased

market size is also having an effect on distribution practices

of these products. An estimated 45,000 dentist offices now

sell Whitestrips.The teeth whitening product-market is in transition from a

new market to a mature market. The teeth whitening market

is witnessing the introduction of new whitening products.

Given the mix of new as well as established products, it is

expected that some consumers will be in their early stages of

learning about the product, while others may be more

knowledgeable about the product. Thus, we expect that some

consumers would be “new” to the market, whereas others

may have considerable knowledge and/or experience with the

products. This provides a good opportunity to study the

differences in communication between these two groups, viz.

relatively new and those with greater knowledge. Thus, the

research question is: does the effectiveness of type of discount

and price bundling vary by the level of knowledge of the target

audience?In summary, this study focuses on three issues:

1 whether consumers prefer to purchase bundled items or

individual (unbundled) items;2 the influence of form of discount (gift card, cash discount

or free items); and3 if the effectiveness varies by the knowledge of the target

market.

The next section provides a review of literature and develops

the necessary hypotheses to be tested.

Literature review

Price bundling

Price bundling involves setting one price for a bundle of

products. It is practice followed widely in computer products

where the bundle price includes the computer and other

related items such as the printer, monitor, software, etc.

Automobile manufacturers (dealers) also use price bundling

(a premium package option may include heated seats, xenon

lights, sports suspension, day and night rear view mirror,

etc.). The assumption is that the bundle priced items offer

more value and are therefore more attractive to the buyer.

The seller makes the buyer aware that the buyer is getting a

bargain in the bundle because if the items are purchased

separately, the aggregate price far exceeds the bundle price

(Yadav and Monroe, 2003).The important question in price bundling has to do with

the relative effectiveness of price bundle, i.e. do consumers

prefer a bundle priced package or prefer to purchase the items

individually. There is some evidence that bundling results in

savings as compared to buying individual items. For example,

Estelami (1999) conducted a descriptive study of savings

resulting from fast food bundle items. The study was based on

existing price bundles in fast food category, computers and

photographic equipment. The findings show that on average

consumers save approximately 8 percent by buying a bundle

package.

Perceived valueRather than measuring the amount of savings, other

researchers have focused on perceived value of buying a

bundle. Naylor and Frank (2001) formulated a regression

model with bundle packaging, quality, cost, and

disappointment/delight as predictors of value for an all-

inclusive stay at a resort. The variable disappointment/delight

was a composite of two variables: expecting to find the bundle

and the outcome of price bundle. The findings revealed that

quality had the maximum impact (t ¼ 12:58), followed by

prior visit (t ¼ 2:58) and disappointment/delight (t ¼ 2:48)on the perceived value of the products.A related aspect of overall value derived from a bundle has

to do with the loss from partial consumption of items in a

bundle. An example is that of buying a season ticket to a

sporting or music event. Soman and Gourville (2001)

introduce the concept of transaction decoupling to explain

the value of a bundle package of goods. They use the setting

for multiple shows (days) tickets to show that people are more

likely to forego seeing a show when they purchased a season

ticket or multi-performance ticket as compared to those who

purchased a single event ticket. Their findings revealed that

subjects were less likely to use the last day of ski tickets or

vacation day when purchased as a bundle. The explanation is

based on the concept of sunk cost that there is greater

pressure to use the tickets if they are paid for than if they are

free. Nevertheless, a couple of points in this study are worth

noting. The subjects in the experimental groups were told to

assume that they had four individual tickets (one group) while

the other group was told that they had a four-day pass.

Second, since the total cost of tickets was the same, the study

focused on product bundling and not price bundling. Thus,

interesting as the findings are, they do not explicitly consider

whether or not price bundling is effective. Since the cost of

the four-day pass is the same on a unit basis, they also do not

help in assessing the issue of quantity discount for purchasing

items in large quantities.Heeler et al. (2007) conducted an experimental study to

estimate what the subjects would be willing to pay for an

equivalent bundle of items. The setting for their study was the

optional package in automobiles. The group of subjects in the

bundled options category was asked to estimate the total

market price of all options if purchased individually, while the

subjects in the unbundled options category were asked to

estimate the total market price of all options as a bundle. The

results revealed significant differences in estimates of market

price; the expected price was significantly lower for the

bundled condition.Parguel et al. (2007) describe the perceived benefits of

bundling in packaged goods. They posit that marketers often

bundle products where they include an extra sample size or

full size item. Their study focuses on “buy two get one free”

type promotions. The setting for the study was shower gel

bottles or chocolate. The free product was either pre-

packaged or combined as an individual item. The results

revealed that subjects perceived higher monetary benefit for

separate item bundle as compared to pre-wrapped bundle.Gilbride et al. (2008) investigate the effects of product

bundling using discrete choice design. The products

Bundling or unbundling frequently purchased products

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investigated are a tote bag and a garment bag. Their findings

are similar to Heeler et al. (2007) in that subjects expect a

bundle to cost less. The results support bundling strategy

when the reference prices of individual items are not shown.

Thus, subjects perceive that mere bundling is cost effective.

Products within a bundleA number of studies suggest that the overall attractiveness of a

bundle depends on the items within a bundle. For example,

the researcher may manipulate the salience of the items in a

bundle. Or some researchers use the term focal product or tie-

in (accompanying the focal product) product. This research

draws from reference pricing research. Janiszewski and Cunha

(2004) use this reference pricing framework to investigate the

sensitivity in price discount in a bundle set of items. They

describe products as the focal (more important) product such

as pizza and a tie-in product (less important) such as Coke.

The findings reveal that consumers are more sensitive to the

price discount on a less important product than an equivalent

amount of discount on the important product. Their

explanation is that the less important product may lie on

the steeper portion of the value function. They conclude that

the preference for the bundle is mediated through perceived

value of the bundle.Another study that focuses on salience of items within a

bundle is by Raghubir (2005). The overall tag line is “buy one

get one free” offer. The between subjects one way

experimental design investigation involved subjects choosing

a pearl necklace and a pearl earrings either as a bundle

package for $66.00 or buy pearl necklace and get earrings

free, or buy earrings and get the necklace free. The dependent

variable was the price the subjects were willing to pay on an

open-ended scale. The lowest mean value of willingness to

pay was $20.22 for necklace with free earrings. The highest

mean value was $35.42 when the necklace was offered as free

with the purchase of earrings. The mean value for willingness

to pay was $23.46 for the bundle option.Another type of product variation within a bundle explores

the effect of complementary or substitute products. Sheng

et al. (2007) test the effect of price discount in a setting

involving bundle products as well as product

complementarity. The high complementarity product pair

was a clothes washer and a dryer, whereas the low

complementarity pair was grill and chair. The price

discount was either 10 percent or 30 percent of the original

combined bundle price. For example, high complementarity

and low price discount condition would include the statement

– buy the washer at $400.00 and get the drier for $ 320.00

(10 percent off the combined price of $ 800.00). The

dependent variables in a 2 £ 2 between subject experimental

design were perceived price and perceived quality.The findings revealed the significant main effect of price

discount on perceived price. The higher price discount was

perceived as more attractive and fair priced. The interaction

effects of price discount and product complementarity were

significant on perceived quality. The low price discount and

high complementarity had the most impact on perceived

quality, whereas a larger price discount has an adverse effect

on perceived quality.Koukova et al. (2008) focus on products in the digital age.

Their study investigates consumers’ willingness to pay for

print and electronic form of book and newspaper. The

findings revealed that subjects were not willing to purchase

dual subscription unless the discount was very large. The

authors attribute the findings to limited shelf life (and thus

limited use) of information.

Perceived riskIn addition to savings or value derived from a bundle, there is

research suggesting that bundle items are perceived as less

risky. Sarin et al. (2003) formulate various propositions

showing that perceived risk is reduced by credibility and the

amount of discount offered in a bundle. The study has not

been empirically tested. Similarly Hsu and Chang (2007)

summarize major findings on price bundling and posit various

propositions and develop a comprehensive model of

consumer choice. This model has also not been tested

empirically; nevertheless the formulation shows various

factors such as risk, effort, cost, benefit, etc. leading to

perceived value.In summary, the relevant research findings suggest that

consumers perceive they are receiving monetary savings by

buying a bundle. The research is not conclusive as to whether

it is in the interest of buyers (and marketers) to promote

bundled items. Furthermore, there is little evidence to suggest

the relative effectiveness of various forms of monetary rewards

(gift card versus instant discount). For this paper we are using

complementary products related to teeth care. Based on

above conceptualization and findings the following hypothesis

is formulated:

H1. It is expected that the impact of price bundling will be

significant. Specifically, it is expected that a bundle

product will have a greater favorable impact on

attitudes and intentions to use teeth whitening

product.H2. It is expected that instant discount will be preferred to

other forms of discount.

Method

Design and procedure

A 2 £ 4 nested factorial design was used to study the influence

of bundling and form of discount. The factor price bundle

had two levels (individual items or bundled items), and the

factor form of discount had four levels (no discount, discount

in the form of a gift card, instant cash discount and free

items). Since the form of discount is not applicable for buying

just the focal product (individual unbundled item), the factor

form of discount is nested within price bundle. Thus, five

different brochures were designed to show various

combinations of price bundles with applicable forms of

discount. The brochures were designed to resemble

professionally designed promotional pieces.The price bundling option started with the following major

paragraph heading: “Imagine beautiful white teeth in just

three days!”. This was followed by the statement, “Purchase

your choice of well-known brands of teeth whitening product

kit. You may choose the bundle package kit from Crest,

Colgate or any other brand you like.” A bordered box

described the items in the bundle as: teeth whitener (any

form), toothpaste, mouthwash, toothbrush, and dental floss.

The unbundled version was similar with the exception of

showing the prices of individual items. The various forms of

discount were displayed within another bordered box. For

example the instant discount condition included, “$10.00


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instant savings when you buy the bundle for $34.99.” Finally,

the bottom of the brochure included pictures of the products

included in the bundle. The overall type of discount ofmessage and credibility was similar to that in earlier studies

(Maheswaran and Meyers-Levy, 1990; Meyerowitz andChaiken, 1987).Two booklets were prepared. The first booklet contained

the instructions and the brochure stimuli. Subjects were

instructed to look at the following brochures as they would at

any brochure or ad in a magazine. They were furtherinstructed that after they had looked at the brochure, they

should put the booklet away and not refer to it further duringthe experiment. The second booklet contained the

questionnaire.

Subjects

The subjects for the experiment were students attending anurban midwestern university. The sample is ideal for

investigating teeth whitening products. The respondentswere primarily in the younger age brackets with 34 percent

under 25 and another 33 percent from 25 to 34 year, another

17 percent between 35 and 44 year and the remaining were 45years or older. The sample contained a relatively larger

proportion of females (54 percent). A large proportion of thesample was college graduates with 32 percent working on

their undergraduate degrees and 39 percent working on their

graduate degrees and 19 percent working on their post-graduate degrees. A total of 431 subjects agreed to participate

in this study and were administered the questionnaire ingroups of less than 5. For the qualitative portion, Creswell

(2002) has emphasized the importance of selectingrespondents that will provide rich and complex responses to

questions. Consistent with this purpose and understanding,

45 subjects were selected. Participants were informed that thestudy was being conducted for academic purposes and that

the investigators were grateful for their help.

Questionnaire

The questionnaire included items to assess attitude and

intention. The attitude toward purchasing the items was

measured using an eight-point semantic differential scale withend points as: good (bad) idea, beneficial (harmful) and

desirable (undesirable). The intention to purchase the itemswas measured with the question, “If you decide to have your

teeth whitened, how likely is it that you will choose the

products in the brochure?” The end points of the eight-pointscale were “very likely” and “not likely.” In addition, the

questionnaire included measures for standard demographicinformation and items to test manipulation of factors.

Results

Manipulation check

The manipulation of price bundling was tested using threedifferent recall measures. One was whether they recall seeing

one bundle price or separate prices for all items in thebrochure. Of the respondents, 95 percent in the separate price

condition answered this question correctly. In the second

manipulation question subjects were asked to indicate if theyrecall seeing any discount. A total of 92 percent in the no

discount condition answered this question correctly. Finally athird question was, “Did you get the impression that you can

purchase dental care products individually, or only as a

bundled package containing teeth whitener and other

products?” In total 92 percent in the individual items

condition answered this question correctly.The manipulation of type of discount was also tested using

a multiple choice response format showing four types of

discounts in different brochures. The correct responses were

88 percent for no discount condition, 73 percent for free gift

card, 88 percent for instant discount and 67 percent for free

items, yielding an average correct response rate of 83.5, which

far exceeds the expected rate of 25 percent average of all four

categories. These tests reveal that the bundle as well as the

form of discount was successfully manipulated.

Attitude

There were two measures of attitudes: attitude toward teeth

whitening products in general and attitude toward the specific

teeth whitening product mentioned in the study. The former

was measured prior to exposure to the brochure whereas the

latter measured the attitude after reading the brochure. These

were measured using an eight-point semantic differential scale

with end points as: good (bad) idea, beneficial (harmful) and

desirable (undesirable). A reliability coefficient was calculated

before arriving at the composite attitude score. The reliability

coefficients (alpha) for the two attitude measures were 0.81

and 0.87 respectively indicating that the statements

measuring the attitudes are internally consistent. The mean

attitude scores for the two measures were 5.92 and 6.20. The

paired comparison difference in the two attitudes was

significant at p ¼ 0:00, indicating a small but significant

improvement in post attitudes.The influence of price bundling as well as the type of

discount on attitude towards using teeth whitening product

was tested using a nested design with type of discount nested

within the bundle. The effect of bundling was in the

borderline area at p ¼ 0:09, while the effect of the type of

discount was not significant. The mean attitude scores for

individual teeth whitening product was 6.29 and the mean

score for bundled items was 6.03.

Intentions

We measured two behavioral intentions, namely, intention to

use the product and also the intention to recommend the

product to friends. The intention to use the teeth whitening

product was measured using an eight-point scale with end

points as not likely and very likely. The influence of price

bundling and type of discount on intention was also tested

using the nested design with type of discount nested within

the bundle. The effect of bundle was significant at p ¼ 0:000with the mean scores of 5.89 (individual items) and 5.08

(bundled items). The effect of the type of discount was

significant at p ¼ 0:04. The mean scores for the nested model

are shown in Figure 1.Next we consider the intention to recommend teeth

whitening products to friends. This test was also based on a

nested model with type of discount nested within the bundle.

The effect of bundle was significant at p ¼ 0:03 with the mean

scores of 5.34 (individual items) and 4.32 (bundles items).

The effect of the type of discount was significant at p ¼ 0:00.The mean scores for the nested mean scores are shown in

Figure 2.


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Value of bundled items

An important aspect in understanding the motivations to

purchase the bundled items rests on the value derived from

buying the bundle. Subjects were asked to rate the overall

value of the teeth whitening product(s) in the brochure. The

end points of the eight-point scale were poor value and

excellent value. The influence of price bundling and type of

discount on perceived value was tested using the nested

design with type of discount nested within the bundle. The

effect of bundle was in the borderline of significance at p ¼0:09 with the mean scores of 5.27 (individual items) and 5.26

(bundles items). The effect of the type of discount was

significant at p ¼ 0:01. The mean scores for the nested mean

scores are shown in Figure 3.

Effect of knowledge (covariate)

As the market for teeth whitening product grows (matures) it

is expected that a larger percentage of consumers will become

more knowledgeable (smarter shoppers) about teeth

whitening products. This study explores the effect of

knowledge on attitudes and intentions. The study included

an eight-point semantic differential scaled question, “How

knowledgeable are you about teeth whitening products”? The

ends points were very (not very) knowledgeable. Knowledge is

used as a covariate in testing the influence of type of discount

and price bundling on attitudes and intentions. The analyses

revealed a significant effect of knowledge on attitudes and

intentions without any appreciable change in the influence of

type of discount and price bundling. Thus, the effect of price

bundling and form of discount is the same for novice segment

of consumers as well for expert segment of consumers. The pvalues corresponding to the factors and covariate are shown in

Table I. The implications of these findings are discussed in the

next section.

Discussion and managerial implications

In formulating effective pricing strategies, marketers have the

option of pricing and selling these products on a stand-alone

basis, i.e. individual pricing, or they can use price bundling to

enhance value of the overall bundle. The assumption is that

the bundle priced items offer more value and are therefore

more attractive to the buyer. This paper investigates the

effectiveness of price bundling and form of discount on

changes in consumers’ attitudes and intentions. There are

three major implications for marketing managers.First, should marketing managers price and promote these

items as a bundle or as individual items? While, there is

widespread belief that marketers can influence consumers to

choose bundled items through savings that come from

purchasing bundled items, the findings of our study suggests

caution in bundling frequently purchased items. The mean

scores for intention to use the teeth whitening products and

the intention to recommend these items to others is very

similar. The major differences are between intention scores

and the perceived value scores of these items. While the

subjects in this experiment see higher value by purchasing the

bundle, the intention scores do not support bundling. The

intention scores are higher towards unbundled teeth

whitening product as compared to the bundled versions.Furthermore, we tested for statistical significance of the

main effects of bundling. This test compares the mean scores

of individual items with the overall mean score of all types of

discount under bundling. The Bonferroni test was significant

for both types of intention measures indicating a statistically

significant greater preference towards individual items.The second question is the following: Which form of

discount is most effective? Although it is common to see

products advertised as “buy one, get one free,” the marketing

literature offers limited help as to the relative effectiveness of

Figure 1 Mean values for intention to purchase teeth-whiteningproducts

Figure 2 Mean values for intention to recommend teeth-whiteningproducts

Figure 3 Mean scores for value of teeth-whitening products


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various forms of discount. The results indicate that the effect

of form of bundling is significant on intentions. Figures 1-3

reveal that free gifts are preferred over other forms of

discount, followed by gift cards. Bonferroni pairwise test was

used to determine significant differences within all possible

pairs of bundled items. The findings show a significant

difference between instant savings and free items on

intention measure (Figure 1). With respect to intention to

recommend (Figure 2), the findings show a significant

difference between free items and no discount conditions

and between gift card and no discount. These tests reveal

that free items are preferred over gift cards. The least

preferred option is of course the no discount condition and

instant discount. Nevertheless, regardless of the form of

discount, the individual items are preferred or at least equal

to the free items condition. This is notable especially in view

of the findings that subjects perceive higher value from a

bundle.While the quantitative findings are important, they do not

reveal the important question of why one form of discount is

preferred over other discounts or individual items. This is the

subject that is explored via in-depth interviews. The

qualitative portion is described after the next issue.The third question addressed in the study is that of the

effect of knowledge of consumers. As the market for teeth

whitening product matures, consumers are expected to

become more knowledgeable about the products. Thus, it is

conceivable that novice consumers might respond

differentially to promotional efforts than expert consumers.

This issue is investigated using the knowledge of teeth

whitening products as a covariate. The p-values for various

dependent variables are shown in Table I. The effect of the

covariate is significant in all cases. The table also reveals that

the pattern of significance for price bundling and form of

discount does not change by adding the covariate. Thus,

although the influence of knowledge is significant, the major

findings are unchanged and subjects still prefer individual

items over bundled items.

Qualitative insights

The findings from the nested experimental design indicate

that subjects reveal a preference for purchasing unbundled

items and within the bundle option there is a greater

preference towards free items. The important question is

why do subjects exhibit these preferences? The in-depth

interviews appear to answer this question. The first issue

deals with trying to get some additional insights into buying

a bundle versus unbundled items. The major motivation for

this group lies in price discount. They will purchase the

bundle primarily because of a large price discount in some

form or another. Some of the statements they expressed are

shown as follows:

I like to buy bundled products if the price is really low.

Yeah, I think that is one downfall to these bundled packages. A lot of the

time I only want one of the products, not both. So if this is the case, there is

really no reason to buy the bundle. I would rather just buy the one product

that I want individually.

I prefer the discount on all items in the bundle. I think that would affect my

decision, I would like to know exactly what percent I am saving on each item.

I would think the bundle packaged together might seem a little more

appealing because it’s all together and it’s one price. You can just see that

price. You don’t have to think about “well, if I buy this and then get this for

50 percent off” It’s a quicker decision because it’s all together and you don’t

have to think about it as much.

The second issue discussed here is the influence of gift cards.

There were several subjects who expressed a desire for

receiving gift cards with a purchase. Some of the responses are

shown below:

Now we’re talking. I would be much more interested in that. I think gift

cards are the best. I would prefer a gift card because I could use it on

anything I wanted. I haven’t ever really seen a package deal at the store that

comes with a gift card though. That seems like a pretty innovative idea. I

wish more things came with gifts cards. Some subjects responded by

comparing their preference for a gift card with some other form of discount;

these sentiments are also shown below.

I prefer instant savings better so the gift card would have to also offer me a

greater amount of cost savings than if I had just received the savings

immediately.

I would purchase the bundle if I could use the gift card immediately and if I

could apply it to something I was already going to buy.

I like gift cards. I always like that better than a coupon.

Same as the coupon deal, I’m not interested. I don’t want the hassle of

keeping track of the coupon or the gift card; I want the discount

immediately.

The next issue is the use of free items. This was one of the

preferred options. Typical responses are shown below:

The word “free” on a bundled package would definitely catch my eye more.

It would definitely matter what came free with the teeth whitener. I wouldn’t

buy the bundled package if I wasn’t going to use both the items.

I would prefer the one that had free mouthwash with the purchase of the

whitener. A fixed discount is good and would probably still catch my

attention, but I think the word free would just make it seem like a walked

away the winner.

I like this option. It is easy to understand, and doesn’t try to trick the

customer from understanding what the amount of savings will actually be.

If I am going to buy the teeth whitener, and now I would be getting free stuff

that would be an easy option so that would be fine with me.

That would be a good choice. It makes me feel like I am receiving a free

award for purchasing the teeth whitener.

From the responses shown above, one explanation that

emerges is the enticement by the use of the word “free.” The

word free is just that, something with no cost. Consumers do

not need to calculate the utility of a discount – it is totally

free.

Table I P values for main effects and covariate (knowledge)

Bundling Form of discount Knowledge

Dependent variable n p value without the covariate n p value without the covariate n

Attitude 0.24 0.09 0.80 0.46 0.00

Intention 0.01 0.00 0.13 0.04 0.00

Recommend 0.12 0.03 0.00 0.00 0.00

Value 0.03 0.09 0.03 0.01 0.00


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Thus, in conclusion, the findings suggest caution in the

generalized use of price bundling. It is suggested that a

product bundle should have complementary items that are

likely to have similar usage pattern so as to provide similar

utility over the life of the product. For items that may have

dissimilar usage such as those included in this study,

consumers may prefer the option of buying individual items.

Furthermore, in terms of promoting the bundle, it is

suggested that that free items have greater appeal. Lastly, it

is suggested that this study be replicated for other products,

especially consumer durables.

References

Creswell, J. (2002), Educational Research: Planning,

Conducting, and Evaluating Quantitative and Qualitative

Research, Merrill Prentice-Hall, Upper Saddle River, NJ.Estelami, H. (1999), “Consumer savings in complementary

product bundles”, Journal of Marketing Theory and Practice,

Vol. 7 No. 3, pp. 107-14.Gilbride, T., Guiltinan, J. and Urbany, J. (2008), “Framing

effects in mixed price bundling”, Market Letters, Vol. 19

No. 2, pp. 125-39.Heeler, R., Nguyen, A. and Buff, C. (2007), “Revisiting

complex theories of bundle effects”, Journal of Product

& Brand Management, Vol. 16 No. 7, pp. 492-500.Hsu, T.H. and Chang, K.-F. (2007), “The classification and

evaluation model for product bundles”, Journal of American

Academy of Business, Vol. 11 No. 2, pp. 64-70.Janiszewski, C. and Cunha, M. Jr (2004), “The influence of

price discount framing on the evaluation of a product

bundle”, Journal of Consumer Research, Vol. 30 No. 4,

pp. 534-46.Koukova, N., Kannan, P. and Ratchford, B. (2008), “Product

form bundling: implications for marketing digital

products”, Journal of Retailing, Vol. 84 No. 2, pp. 181-94.Maheswaran, D. and Meyers-Levy, J. (1990), “The influence

of message framing and issue involvement”, Journal of

Marketing Research, Vol. 27 No. 3, pp. 361-8.Meyerowitz, B.E. and Chaiken, S. (1987), “The effect of

message framing on breast self-examination attitudes,

intentions, and behavior”, Journal of Personality and Social

Psychology, Vol. 52, March, pp. 500-10.Naylor, G. and Frank, K.E. (2001), “The effect of price

bundling on consumer perceptions of value”, The Journal of

Services Marketing, Vol. 15 Nos 4/5, pp. 270-81.Parguel, B., Pechpeyrou, P., Zaaraoui, O. and Desmet, P.

(2007), “Format effects in volume discounts to

consumers”, Journal of Product & Brand Management,

Vol. 16 No. 5, pp. 348-57.Raghubir, P. (2005), “Framing a price bundle: the case of

‘buy/get’ offers”, Journal of Product & Brand Management,

Vol. 14 Nos 2/3, pp. 123-8.Sarin, S., Sego, T. and Chanvarasuth, N. (2003), “Strategic

use of bundling for reducing consumers’ perceived risk

associated with the purchase of new high tech products”,

Journal of Marketing Theory and Practice, Vol. 11 No. 3,

pp. 71-82.Sheng, S., Parker, A.M. and Nakamoto, K. (2007), “The

effects of price discount and product complementarity on

consumer evaluations of bundle components”, Journal of

Marketing Theory and Practice, Vol. 15 No. 1, pp. 53-64.

Soman, D. and Gourville, J.T. (2001), “Transaction

decoupling: how price bundling affects the decision to

consume”, Journal of Marketing Research, Vol. 38 No. 1,

pp. 30-44.Stremersch, S. and Tellis, G.J. (2002), “Strategic bundling of

products and prices: a new synthesis for marketing”,

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Further reading

Arora, R. and Arora, A. (2004), “The impact of message

framing and credibility: findings for nutritional guidelines”,

Services Marketing Quarterly, Vol. 26 No. 1, pp. 35-53.Arora, R., Stoner, C. and Arora, A. (2006), “Using framing

and credibility to incorporate exercise and fitness in

individuals’ lifestyle”, The Journal of Consumer Marketing,

Vol. 23 No. 4, pp. 199-207.Goldberg, M.E. and Hartwick, J. (1990), “The effects of

advertiser reputation and extremity of advertising claim on

advertising effectiveness”, Journal of Consumer Research,

Vol. 17 No. 2, pp. 172-80.Homer, P. and Sun-gil, Y. (1992), “Message framing and the

interrelationships among ad-based feelings, affect, and

cognition”, Journal of Advertising, Vol. 21 No. 1, pp. 19-33.Kamakura, W.A. and Kang, W. (2007), “Chain-wide and

store-level analysis for cross-category management”,

Journal of Retailing, Vol. 83 No. 2, pp. 159-70.Kim, H.M. (2006), “Consumers’ responses to price

presentation formats in rebate advertisements”, Journal of

Retailing, Vol. 82 No. 4, pp. 309-17.Kopalle, P., Biswas, D., Chintagunta, P., Fan, J., Pauwels, K.,

Ratchford, B. and Sills, J. (2009), “Retailer pricing and

competitive effects”, Journal of Retailing, No. 1, pp. 56-70.Levin, I.P. and Gaeth, G.J. (1988), “How consumers are

affected by the framing of attribute information before and

after consuming the product”, Journal of Consumer Research,

Vol. 15, December, pp. 374-8.Munmukka, J. (2008), “Customers’ purchase intentions as a

reflection of price perception”, Journal of Product & Brand

Management, Vol. 17 No. 3, pp. 188-96.O’Keefe, D.J. (1990), Persuasion: Theory and Research, Sage

Publications, Newbury Park, CA.Orth, U.R., Oppenheim, P.P. and Firbasova, Z. (2005),

“Measuring message framing effects across Europe”,

Journal of Targeting, Measurement and Analysis for

Marketing, Vol. 13 No. 4, pp. 313-26.Rothman, A.J., Salovey, P., Carol, A., Keough, K. and

Martin, C.D. (1993), “The influence of message framing

on intentions to perform health behaviors”, Journal of

Experimental Social Psychology, Vol. 29, September,

pp. 408-33.Salovey, P. and Williams-Piehota, P. (2004), “Field

experiments in social psychology”, The American

Behavioral Scientist, Vol. 48, January, pp. 488-505.Simon, H., Fassnacht, M. and Wubker, G. (1995), “Price

bundling”, Pricing Strategy & Practice, Vol. 3 No. 1,

pp. 34-44.


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About the author

Raj Arora (PhD Claremont University) is Schutte Professor ofMarketing at University of Missouri-Kansas City. Hisresearch and publications are in the areas of consumerbehavior (consumption emotions, involvement, framing, andcredibility) and services marketing (service quality levels,consumer choice in health care). Raj Arora can be contactedat: [email protected]

Executive summary and implications formanagers and executive readers

This summary has been provided to allow managers and executivesa rapid appreciation of the content of the article. Those with aparticular interest in the topic covered may then read the article intoto to take advantage of the more comprehensive description of theresearch undertaken and its results to get the full benefit of thematerial present.

The practice of bundling items together in order to createvalue for the customer is used by many marketers. In general,the bundle includes extra items that supplement the mainproduct that the customer is purchasing. Several forms ofprice bundling are commonly deployed. Included are:. Pure component pricing where each individual item is priced

and offered separately.. Pure bundling – his variant involves the offer of a bundle of

goods at a specified price.. Mixed bundling that allows the consumer to choose either

of the above options.

Price bundling is commonly deployed by computer retailerswho might include goods like printers, monitors and softwarewith the computer in the same bundle. The practice islikewise evident among automobile manufacturers anddealers.The attraction to buyers is that purchasing all the goods

separately would typically prove more expensive. Evidenceindicates that consumers expect to pay less when the goodsthey buy are bundled together. According to one study,purchasing a bundle can prove around 8 percent cheaper.Marketers consider this strategy more preferable than simplyoffering a discount on the main product as a price reductionmight negatively impact on its perceived quality.That perceived quality can be a somewhat complex issue is

noted by certain scholars. One example cited is the purchaseof season tickets for such as a series of sporting events. Thesuggestion here is that consumer perception of value mightmake them more inclined to not use their tickets on certainoccasions during the series. Bundle value diminishesaccordingly when this occurs. In contrast, it is claimed thatpeople become much likelier to use tickets when they arebought for a single event rather than a whole series.Researchers have discovered that the appeal of a bundle

depends on what items are included. This factor cansignificantly influence consumer perception. In one survey,how well any additional items complemented the mainproduct in the package was considered especially important.The example of bundling a dryer with a washing machine wasused to indicate “high complementarity”. It was found thatcombining this condition with a low price discount had themost positive effect on perceived bundle quality. The impactwas negative when a larger price discount was offered.

It is also proposed that bundling items helps reduce

consumer perception of the risk involved in making a

purchase. The notion is that credibility and the price

discount help in this respect. Scholars also believe that the

impact on consumer decision making might vary by the type

of discount, which could also be in the shape of alternatives

like vouchers or gift cards to be redeemed later.Arora explores these issues in a quantitative survey of

students from an urban Midwestern university in the USA.

Over half of the 431 subjects were female and 67 percent were

aged 34 years or below. For the qualitative part of the study

that followed, 45 respondents were chosen.Participants were exposed to brochures showing different

combinations of price bundle and discount options. Items

bundled with the main teeth whitener product included

toothpaste, toothbrush, mouthwash and dental floss. They

were then asked to indicate preferences and to answer various

questions about their attitude towards and intention to

purchase teeth whitening products. This product was selected

because teeth whitening has become more mainstream over

recent years and the variety of available products has

increased accordingly. Market growth has also seen a sharp

rise in the number of distributors.Given these recent developments, it is assumed that some

consumers will be more knowledgeable about teeth whitening

products than will others. One aim of the current research is

to ascertain whether or not knowledge level has any bearing

on consumer attitude toward price bundles and the type of

discount that they prefer.It is widely believed that choosing a bundle of items helps

the consumer save money. A related assumption is that

marketers are able to persuade consumers to choose the

bundled option. However, participant response to questions

about purchase intention indicated a stronger preference

towards buying the study items individually. This is despite

their acknowledgment that bundles offer greater value.Differences between “novice” and more informed

consumers were anticipated. Although results indicated the

importance of knowledge, respondents still expressed a

preference for the individual items rather than a bundle. In

terms of discount types, free items were most desired, with

gift cards second. No discount at all was the least favored

option. Yet purchasing the items individually was again

considered at least equal to receiving free gifts.The qualitative part of the study helped offer greater insight

into consumer decision making. Answers revealed that:. Low price can make a bundled option more appealing.. Bundles are less attractive when including items the

consumer does not need or want.. Discount on every item in a bundle allows the consumer

to know what savings are being made on each product.. A fixed-price bundle saves the customer time and effort in

calculating any potential savings from buying products

individually.. Gift cards are attractive because consumers can choose

what purchases to redeem them against.. Instant discounts are more preferable because the option

removes the hassle of keeping track of a gift card or

voucher.. Including free items in the bundle makes customers

perceive they are being rewarded for purchasing the main

product.


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. Offering a free item is more transparent because theconsumer can more readily understand what the savingswill be.

. Free items would only appeal if the consumer intended touse them.

In the light of this research, Arora advises a more cautiousapproach when offering price bundles. Additional items in abundle should complement the main product and be broadlycomparable in usage pattern. When products are dissimilar,

consumers may become more inclined to prefer buying the

items individually. The author also implies that free items

might appeal most as a discount option. Replicating the study

in other product categories, especially consumer durables, is

recommended.

(A precis of the article “Bundling or unbundling frequently

purchased products: a mixed method approach”. Supplied by

Marketing Consultants for Emerald.)


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