Seller Beware: How Bundling Affects Valuation

Franklin Shaddy and Ayelet Fishbach
Article Snapshot
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Bundling Affects Valuation
Key Takeaways

​What? Bundling causes consumers to perceive multiple items as a single, inseparable “gestalt” unit.

So What? Consumers will demand more compensation for the loss of items from bundles, yet offer lower willingness-to-pay for items added to bundles.

Now What? Firms should be more cautious to bundle an untested product as the adverse risk is much greater than if that untested product is sold unbundled.

Article Snapshot​s: Executive Summaries from the Journal of Marketing Research

The effect of bundling on valuation is asymmetric: Consumers demand more compensation for the loss of items from bundles, compared to the loss of the same items in isolation, yet offer lower willingness-to-pay for items added to bundles, compared to the same items purchased separately.


Research Question
When a bundle and the sum of its parts are objectively identical, might consumers nevertheless value items differently, depending on whether they are offered as a bundle or offered separately? The present research examines this question, which has not been explored by previous work. We find that consumers demand more compensation for the loss of items from bundles, compared to the loss of the same items in isolation, yet offer lower willingness-to-pay for items added to bundles, compared to the same items purchased separately.

Methods
We manipulated both whether items were offered separately or as a bundle and whether items were considered in acquisition or loss. We then measured purchase and selling prices, in addition to satisfaction and dissatisfaction.

Findings

The asymmetry hypothesis that we propose advances the current literature on the psychology of bundling by demonstrating how bundling itself can affect valuation. Specifically, we find that (1) consumers demand more compensation for and experience greater dissatisfaction from the loss of items from bundles, compared to the loss of the same items in isolation, and (2) consumers offer lower willingness-to-pay (WTP) for and experience less satisfaction from items acquired as or added to bundles, compared to the same items purchased separately.

Implications

For bundles, consumers both pay less and demand more. Pricing decisions and marketing strategies should be informed by this asymmetric effect of bundling on valuation. Firms should be aware that when a component of a bundle fails or is unavailable, consumers can become more dissatisfied and demand more compensation than when an identical non-bundled item fails or is unavailable. Yet consumers offer lower WTP for and experience less satisfaction from items added to bundles. More broadly, marketers should be cognizant of the fact that consumers are reluctant to alter bundles. 

Questions for the Classroom

  • How does bundling itself affect valuation?
  • How should pricing decisions and marketing strategies be informed by this asymmetry in valuation?
  • Why do consumers resist altering bundles?

Article Citation: Franklin Shaddy and Ayelet Fishbach (2017) Seller Beware: How Bundling Affects Valuation. Journal of Marketing Research: October 2017, Vol. 54, No. 5, pp. 737-751

doi: http://dx.doi.org/10.1509/jmr.15.0277 


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Franklin Shaddy and Ayelet Fishbach
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