Why would consumers pay less for separate than bundled products?

Mar 15, 2012

Packaging an expensive item with a cheap one seems like a no-brainer. But according to a new study in the Journal of Consumer Research, most consumers in this situation are not willing to pay as much for a combination as they would for two separate items.

" often encounter product combinations, many of which include both expensive and inexpensive items," write authors Aaron R. Brough (Pepperdine University) and Alexander Chernev (Northwestern University). "Logically, people should be willing to pay more for options that they like. Adding an attractive option to an existing offering might be expected to increase the offering's value and consumers' willingness to pay."

But consumers don't always follow that logic. For example, consumers who were willing to pay $2000 for a flat-screen TV and $10 for a when they considered them separately were only willing to pay $1950 when the two were combined. Likewise, pairing an inexpensive tote bag with a higher-priced suitcase decreased consumers' willingness to pay. The authors say this occurred even when consumers were willing to pay full price for each item considered alone.

Consumers tend to think in categorical terms, according to the authors. For example, when items classified as expensive or inexpensive are combined, consumers perceive the combination to be "moderately expensive." "The problem is consumers forget that they are purchasing multiple items. As a result of the erroneous that a combination of expensive and inexpensive items is less valuable than a single expensive item, consumers are willing to pay less for the combination than for a single item that they perceive as 'purely expensive.'"

The authors found that the number of consumers who chose an expensive product declined by approximately 15 percent when an inexpensive item was added to it. They also found that across six different (scooters, grills, phones, jackets, backpacks, and TVs) participants were willing to pay, on average, 25 percent less for a combination of an expensive and inexpensive item.

"Because including an inexpensive item in a bundle can decrease consumers' to pay, managers may be better off selling items from different price tiers separately," the authors conclude.

Explore further: Less privileged kids shine at university, according to study

More information: Aaron R. Brough and Alexander Chernev. "When Opposites Detract: Categorical Reasoning and Subtractive Valuations of Product Combinations." Journal of Consumer Research: August 2012.

add to favorites email to friend print save as pdf

Related Stories

Early product launches: How will consumers respond?

Apr 19, 2011

A new study in the Journal of Consumer Research explains why consumers often indicate they are willing to pay more for a product that is not yet available—but are reluctant to pay that price when the product is ultima ...

Pricing practices cost consumers

Apr 12, 2007

You may be paying more for that can of soup or loaf of bread, depending on whether they have an individual price sticker or not. A new study from the DeGroote School of Business finds grocery items individually ...

Recommended for you

Why are UK teenagers skipping school?

Dec 18, 2014

Analysis of the results of a large-scale survey reveals the extent of truancy in English secondary schools and sheds light on the mental health of the country's teens.

Fewer lectures, more group work

Dec 18, 2014

Professor Cees van der Vleuten from Maastricht University is a Visiting Professor at Wits University who believes that learning should be student centred.

How to teach all students to think critically

Dec 18, 2014

All first year students at the University of Technology Sydney could soon be required to take a compulsory maths course in an attempt to give them some numerical thinking skills. ...

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

Doug_Huffman
not rated yet Mar 19, 2012
Capitalism works properly only in an educated and skeptical market.

I learned skepticism of marketeering from price increases for products *new* and *improved* but which only packaging and copy had changes. I am very unlikely and very unwilling to buy a pig in a poke bundle for being suspicious of which item is worthless while *new* and *improved*.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.