Shopper Response to Bundle Promotions for Packaged Goods

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Bram Foubert and Els Gijsbrechts

Executive Summary
This study analyzes the purchase effects of bundle promotions in a category of consumer packaged goods. Bundle promotions grant a discount to consumers who purchase a specific number of units (the quantity requirement) from a designated range of items. For example, a pizza brand could allow a $2 discount on every bundle of three pizzas selected from a range of ten flavors. Using panel data in the snack chip category, the authors model consumers' decisions whether to buy in the category, how much to buy, and which items to buy, and they investigate how bundle promotions intervene.

A surprising finding is that bundle promotions are particularly effective for stimulating switching behavior but less apt to increase category sales. In other words, rather than converting nonusers or light users to heavy users, bundle promotions attract already heavy users from other brands.

The intense switching behavior derives from two particular phenomena. First, bundle items reinforce one another's choice probability; when the utility of one bundle item rises, a consumer's willingness to allocate the required purchase quantity to the bundle range will increase, thus leveraging the choice probabilities of all bundle items (the leverage effect). Second, even consumers who purchase less than the bundle's quantity requirement, and therefore do not qualify for the promotion, tend to switch to the bundle items in response to the advertised discount (the discount communication effect).

In turn, the weak bundle impact on category sales can be attributed to two mechanisms. First, bundle promotions do not encourage consumers to purchase in the category and may even discourage them from doing so. This is especially true for large quantity requirements. Second, for consumers who buy in the category, a bundle promotion tends to increase purchase quantity but only if the quantity requirement does not exceed a critical point. Beyond that point, the bundle's impact shrinks.

A comparison of the effects of bundle promotions with those of traditional per-unit promotions leads to additional insights. If the primary objective is to increase a specific item's unit sales, bundle promoting that item with a few other items is more effective than promoting the item on a per-unit basis. Similarly, if the focus is on the sales of a complete brand line, bundle promoting the items in the brand line is more rewarding than promoting them on a per-unit basis.

However, retailers that want to enhance category sales will find little use for promotional bundles. Instead, per-unit promotions substantially increase category sales, such that retailers pursuing category expansion will be better off promoting on a per-unit basis.

Biography
Bram Foubert is Assistant Professor of Marketing at the University of Maastricht, the Netherlands. He holds a PhD in Applied Economic Sciences from the University of Antwerp, Belgium. His research focuses on promotion effectiveness and modeling consumer decisions.

Els Gijsbrechts is Professor of Marketing at Tilburg University, the Netherlands. She received a PhD in Applied Economic Sciences from the University of Antwerp, Belgium, and previously held positions at the University of Antwerp and the Catholic University of Leuven. Her research focuses on modeling consumers' shopping behavior and their responses to retailer and manufacturer decisions and characteristics, such as stockouts, shelf layout, price (promotions), branding, and assortment decisions.

Journal of Marketing Research, Vol. XLIV, No. 4, November 2007
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