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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. Theoretical perspectives on price bundling Research Objective Methodology Results Discussion

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CONSUMER PERCEPTIONS OF BUNDLES

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  1. CONSUMER PERCEPTIONS OF BUNDLES Roger Heeler, York University Adam Nguyen, Siena College Cheryl L. Buff, Siena College 2008 Behavioral Pricing Conference

  2. Overview • Theoretical perspectives on price bundling • Research Objective • Methodology • Results • Discussion • Limitations and Future Research • Questions and Comments

  3. 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

  4. 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

  5. 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.

  6. 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

  7. 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).

  8. 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

  9. 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

  10. 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

  11. 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

  12. Questions and Comments? Thank You Roger Heeler, York University Adam Nguyen, Siena College Cheryl L. Buff, Siena College

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