Consumer Perception Towards Product Bundling

A Consumer Behavior Project

BY YASH RANGA

HARSHIT SETHGUNJAN BHATTACHARYA

Mapping Consumer Mind• Understanding Consumer

Behavior

• Influencing purchase and

consumption decisions

• Influencing consumer’s

attitude and behavior

• One of the strategy product

bundling

What is Bundling• Definition: selling products together (bundle)

• Typically at a price that is less than sum of components

• Possible motives:

- Quality Enhancing

- Metering Consumption (for price discrimination)

- Strategic Advantage (extend an advantage from one market to the other)

- Price discrimination

Types of Bundling

Pure Bundling• When a consumer can only purchase the entire

bundle or nothing

Mixed Bundling• When consumers are offered a choice between

the purchasing the entire bundle or one of the separate parts of the bundle

Joint Bundling Leader Bundling Mixed leader Bundling

• “Since customers may not have planned to buy all of the components, the price on the product bundle must be substantial enough to induce them to buy the bundle”

-Marketing Management(Kotler, Phillip 8th Edition)

• “Bundling usually makes price comparisons between the bundles and its components impossible and thereby sidesteps potential unfairness perceptions and reductions in reference prices”

-Service Marketing, A South Asian Perspective

(Christopher lovelock, Jochen Wirtz, Jayanta Chatterjee 5th Edition)

• “Product Bundling is a type of discounting, where a bundled product is sold to customers at a reduced price, as compared to the price of separate items”

-Marketing Management(Czinkota, Kotabe 2nd Edition)

Different views over Product Bundling

Terms and Conditions• There are economies of scale in production.

• There are economies of scope in distribution.

• Marginal costs of bundling are low.

• Production set-up costs are high.

• Customer acquisition costs are high.

• Consumers appreciate the resulting simplification of the purchase decision and benefit from the joint performance of the combined product.

• Consumers have heterogeneous demands and such demands for different parts of the bundle product are inversely correlated

Benefits from BundlingFor Companies/Seller

• A bundle offering directs attention to the separate products included.

• if consumers do not choose to purchase the bundle, they notice the products and are more likely to purchase one of the included bundle products.

• This is manifested in increased sales of the separate products during bundle promotion campaigns

• Even sales of other products, not included in the bundle, are indirectly influenced by bundling

• Bundle offering attracting more customers to enter the store, overall sales have been shown to increase

Benefits from BundlingFor Consumers

• Potential monetary savings

• Reduced risk

• Saves Time

• Increased convenience (Simplified Shopping)

• Value addition if the bundle is a product system

Demerits of BundlingFor Companies/Sellers

• Consumers get accustomed to discounted bundling offers and only buy the products in bulk when there is a promotional campaign

• This risk may be especially large in industries where brand loyalty is low and/or the frequency of bundle campaigns is high

For Consumers

• Consumers who buy bundles often spend more money than consumers who select individual items

• Bundles may also cause reduced freedom of choice and increased risk of waste, as consumers may buy products they do not really want

STUDYING CONSUMER PERCEPTION TOWARDS PRODUCT BUNDLING

Prime Focus• To understand different perception defined by the

consumer in the pre-purchase phase

Sample

• 60 respondents from IBS Hyderabad Students (random sampling)

23%

77%

FemaleMale

Gender ratio

45%

50%

5%

Business

Services

Unemployed/ retired

Father’s Occupation

2%

8%

70%

20%Below 1,50,000

1,50,000 -3,00,000

3,00,000 – 5,00,000

5,00,000 – 10,00,000

Above 10,00,000

Annual family income

Assumptions• Consumers are assumed to have stable preferences and

complete information about costs and benefits of all options, to evaluate all attributes and options and to choose the option that maximizes utility

(Schwartz et al. 2002)

• As the sample size is taken from within the IBS Hyderabad Student crowd it is assumed that there are not external influences over the sample and subject context

• Its applicability and ability to explain everyday situations is restricted

Limitations

Research

Inductive Research Approach (Exploratory)

• Inductive reasoning works the other way, moving from specific observations to broader generalizations and theories

• Informally,, we sometimes call this a "bottom up“ approach

• Conclusion is likely based on premises.

• Involves a degree off uncertainty

Observations

PATTERN

TENTATIVEHYPOTHESI

S

THEORY

Hill

Clim

bing

Scenario 1Imagine that you are going to buy a ready meal for lunch and go to a shop. When you get to the store, it turns out that they have an offer to buy a ready meal and a beverage of your choice for Rs. 90. Regular price of the products is higher, but in combination, the value of meal food around Rs. 70 and the drink approximately Rs. 20

Scenario 2Imagine you are buying a TV and go to a store. When you arrive at the store, it turns out that they have an offer to buy a TV and a home theatre for Rs. 52,000. Regular price of the products in combination is 50,000 for the TV and Rs.15,000 for the DVD player. The combination is thus reduced about 20 percent

Testing Scenarios

LET’S TORTURE DATA !!!

Observations

Scenario 1

Complentary

Quality

Attractivness

Price

Fast buy decision

Good Marcomm

Post purchase satisfaction

Satisfaction level if one product is wasted

0 1 2 3 4 5 6 7 8 9

Anchor product: MealBy product : Beverage

Scenario 2

Complentary

Quality

Attractivness

Price

Post purchase satisfaction

Satisfaction level if one product is

wasted

0 1 2 3 4 5 6 7 8 9

Anchor product: TVBy product : Home Theatre Sys

Conclusion• With is small exploratory study we can infer that the

sample population is does not hesitate to purchase bundled product and the perception regarding value of anchor and by product are treated separately only the pricing factor is considered predominantly in bundled offers

• This study may germinate many potential questions which can be further studied in depth to understand the dynamism of the consumer perception further.

THANK YOUANDKEEP SHOPPING !!!