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CONSUMER PERCEPTIONS OF BUNDLES. Roger Heeler, York University Adam Nguyen, Siena College Cheryl L. Buff, Siena College 2008 Behavioral Pricing Conference . Overview. Theoretical perspectives on price bundling Research Objective Methodology Results Discussion

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consumer perceptions of bundles

CONSUMER PERCEPTIONS OF BUNDLES

Roger Heeler, York University

Adam Nguyen, Siena College

Cheryl L. Buff, Siena College

2008 Behavioral Pricing Conference

overview
Overview
  • Theoretical perspectives on price bundling
  • Research Objective
  • Methodology
  • Results
  • Discussion
  • Limitations and Future Research
  • Questions and Comments
theoretical perspectives on whether when and why price bundling enhances evaluation
Theoretical perspectives on whether, when and why price bundling enhances evaluation
  • Dominant view: Loss aggregation
  • Johnson, Herrmann, and Bauer (1999):
    • Respondents evaluated car offers that varied in the degree of bundling
    • Rating of offers increased as component price information was progressively bundled
    • Explanation: respondents perceived a single loss as less punishing than multiple losses
    • Bundling always enhances evaluation
theoretical perspectives
Theoretical perspectives
  • Inferred bundle saving
  • Heeler, Nguyen, and Buff(2007):
    • Partial replication of Johnson, Herrmann, and Bauer (1999)
    • Respondents inferred a bundle saving when presented with a bundled car offer
    • Alternative explanation for Johnson et al’s finding.
  • Implication: Bundling does not always enhance evaluation
    • Bundling enhances evaluation when inferred bundle saving exists
    • In the absence of inferred bundle saving, consumers may prefer unbundled offer
research objective
Research Objective
  • Heeler, Nguyen, and Buff(2007): inferred bundle saving exists and is a plausible alternative to loss aggregation.
  • The current research tests inferred bundle saving against loss aggregation in an experiment where they make opposite predictions.
method
Method
  • Design:
    • Partial replication of Johnson, Herrmann, and Bauer (1999)
    • Three automobile offers that varied in the degree of bundling
    • Offer 1: bundle
    • Offer 2: unbundled
    • Offer 3: bundled without inferred bundle saving
    • Dependent variables: respondent’s satisfaction and recommendation
  • Sample
    • 88 students
hypotheses
Hypotheses
  • H1a:Offer1 (bundled) will be more highly rated than offer 2 (unbundled).
    • Both theories predict this.
  • H1b:Offer 1 (bundled) will be more highly rated than offer 3 (bundled without inferred bundle saving).
    • This is predicted by inferred bundle saving.
    • Loss aggregation predicts that offer 3 should be similarly rated to offer 1.
    • This is the key hypothesis of this study.
  • H1c:Offer 3 (bundled without inferred bundle saving) will be rated lower than offer 2 (unbundled).
results
Results

Condition Satisfaction *Rec**Average

Offer 1 (n= 31) Bundled 5.29 4.87 5.08

Offer 2 (n= 29) Unbundled 4.93 4.66 4.79

Offer 3 (n= 28) Bundled without

Inferred bundle saving 4.57 4.39 4.48

* 1=Not at all satisfied 7=Very satisfied

** 1= Not recommend at all 7=Definitely recommend

results1
Results
  • H1a marginally supported: Both satisfaction and recommendation were higher for bundled than for unbundled p<.1
  • H1b supported: Both satisfaction and recommendation were higher for bundled than for bundled without Inferred bundle saving p<.05
  • H1c marginally/partially supported: The ratings for bundled without inferred bundle saving were lower than for unbundled. This difference was significant at p<.1 for offer satisfaction, but not significant for recommendation
discussion
Discussion
  • When price bundling enhances evaluation, this effect is due to inferred bundle saving rather than loss aggregation.
    • In the absence of inferred bundle saving, consumers prefer unbundled offer .
  • Theoretical implications
    • Price bundling does not always enhance evaluation
    • Accommodate the prediction of heuristic processing
  • Managerial implications
    • Firms that offer bundles must ensure that their message is consistent with expected saving.
    • But if offer no or small bundle saving than industry average, leave saving unspecified
limitations and future research
Limitations and Future Research
  • Found only marginally significant impact of price bundling
    • Potential confounding factor: product bundling
  • Future research:
    • Testing alternative theories in a pure price bundling context
    • Testing inferred bundle saving versus loss aggregation versus heuristic processing
questions and comments
Questions and Comments?

Thank You

Roger Heeler, York University

Adam Nguyen, Siena College

Cheryl L. Buff, Siena College