Impact of Bundle Type, Price Framing and Familiarity on Purchase Intention for the Bundle

Bundling of products is very prevalent in the marketplace. For example, travel and a rental car (Dolan, 1987), music systems come as a bundle packages include airfare, lodging, and a rental car. Considerable economic of the speakers, amplifier, stereo, and graphic equalizer, and research has focused on the change in profits and consumer surplus that razors and razor blades are routinely sold together. Although ensues if bundles are offered. There is relatively little research in marketing some bundles are obvious (e.g., razors and blades), others are that deals with bundling, however. In this article we concentrate on some far less so (e.g., Coca-cola and discount tickets to Great tactical issues of bundling, such as which types of products should be bundled, Adventure amusement park, Butterball turkey and discount on what price one can charge for the bundle, and how the price of the bundle Florofax flowers, Kraft products' proof of purchases to receive should be presented to consumers to improve purchase intent. For example, a dinosaur version of the Pictionary game, Giant Eagle Grocers we hypothesize that bundles composed of complements or equally priced register tapes for a discount on an Apple Computer, and so goods will result in higher purchase intention. We also hypothesize that price on). Given the widespread use of bundles, it seems important increases will result in larger purchase intention changes than price decreases, to gain an understanding of what makes them work. Further, we expect that the presentation format for describing the price of Considerable research has focused on bundling from an ecothe bundle will influence purchase intention in general, and, depending on nomic viewpoint. The major output of this work has been to the price level of the bundle, different presentation formats will result in explore the conditions under which bundling is an optimal higher purchase intention. Finally, we hypothesize that purchase intention strategy. This research suggest that the profitability of a bunchanges associated with different price levels will be higher for subjects who dling strategy is likely to be influenced by, among other things, are familiar with the products than for subjects who are less familiar with customers' reservation prices for the component products the products. We used an interactive computer experiment conducted among (Adams and Yellen, 1976; Burstein, 1960; Schmalensee, 1984; 83 Master of Business Administration (MBA) students to test our hypotheStigler, 1968; McAfee, McMillan, and Whinston, 1989; Telser, ses. Our findings suggest that: (1) bundles composed of complements have 1979). Schmalensee (1984) shows that bundling will be profita higher purchase intent than bundles of similar or unrelated products, (2) able when the SD for the reservation price of the bundle is less consumers are more sensitive to a bundle price increase than to a bundle than the sum of the SD for the bundle components. Telser (1979) price decrease of equal amounts, (3) different presentation formats for focuses on superadditivity between reservation prices of the describing the price of the bundle influence purchase intention, and (4) more bundle components or complementarity as reasons for profitfamiliar subjects respond to different presentations of equivalent bundles ability of bundling. in different ways than less familiar subjects. We did not find any support The decision to offer a bundle and the design of bundles for the hypothesis that bundles composed of similarly priced items have higher are of obvious importance to marketers. There has been relapurchase intent than bundles composed of unequally priced products, tively little research in marketing dealing with bundling, howl BUSN RES 1995. 33.57-66 ever. Some research within marketing has focused on the optimality of bundling using an applied economic approach (Foster, 1992; Guiltinan, 1987; Hanson and Martin, 1990; Wilson,