Price-Framing Effects on the Purchase of Hedonic and Utilitarian Bundles

Uzma Khan and Ravi Dhar
Journal of Marketing Research (JMR)
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Offering discounts contingent on the purchase of product bundles has become a common promotional tool in today’s market environment. Unlike the conventional marketing practice of bundling related or complementary items, the practice of offering cross-category bundles is growing. For example, it is common at car dealerships to come across deals aggregating security systems with shine protection plans, or leather maintenance systems with tire warranties. Other examples of such cross-category purchase aggregations include cruise packages that bundle fun and vocational training, health tourism deals that bundle medical procedures with vacation, and service bundles (e.g., Comcast) that aggregate phone and cable services. Potential for such cross-category bundles is even greater in online retail settings (e.g., Amazon.com, Buy.com, Shopping.com), where technological advances have made it feasible to spontaneously bundle different types of products.

Focusing on such cross-category bundles, the authors examine whether framing a discount for purchasing a bundle as savings on certain items of the bundle can be more effective than framing an equivalent discount as savings on other equally priced items. The authors differentiate between hedonic versus utilitarian nature of the items in a bundle and demonstrate that a bundle purchase is more likely when a discount for purchasing the bundle is framed as savings on the hedonic component rather than on an equally priced and equally attractive utilitarian item. They explain that framing the discount on the hedonic item provides a justification required to reduce the guilt associated with the purchase of such items. However, because no such guilt is associated with the purchase of utilitarian items, framing the discount on utilitarian component of the bundle has little additional impact.

An implication of the findings is that retailers may encourage greater purchase of indulgent products by bundling them with everyday utilitarian items and framing the discount for bundle purchase as savings on the difficult-to-justify item. Similarly, marketers of products that are generally purchased as gifts for others (e.g., 1-800-Flowers.com, Wine.com) may stimulate sales by providing instant discounts for items purchased for buyer’s own use (e.g., “with an order of 12 roses for your loved one, get six lilies for yourself at half price”). The notion is that gift purchases for others do not induce guilt and require little justification. Thus, bundling them with a guilt-inducing purchase (e.g., flowers for self) and discounting the indulgent element will help sales of the bundle. Moreover, marketers may also be able to balance competing goals associated with the bundled items to enhance bundle purchase. For example, consider a bundle that consists of a car theft protection system and a paint protection plan. While framing the discount on different components may not be effective in increasing this bundle’s sales when both items are perceived as utilitarian, a marketer may successfully increase sales by framing one of the items as relatively hedonic and turning the bundle from a homogeneous to a heterogeneous bundle (e.g., by framing the paint protection plan as preserving the car’s new look and shine versus as preventing rust and discoloration).

Biography
Uzma Khan is Assistant Professor of Marketing in the Graduate School of Business at Stanford University. She received her PhD in Marketing from Yale School of Management and holds a BA in Economics. Before joining Stanford, she served as Assistant Professor of Marketing at Carnegie Mellon University, where she held the Frank and Helen Risch Professorship in Business Chair. As an expert in consumer behavior and marketing management, she investigates decision-making mechanisms and their implications for successful managerial strategies. Her research focuses on how consumers’ actions, goals, emotions, and cognitive orientations influence their preferences in the marketplace. For example, in a recent stream of research, she examined the deliberative and implicit processes of self-regulation goals to understand factors that affect consumption of luxuries and other guilt-inducing products (e.g., unhealthful food). In another line of research, she has examines how a current choice is influenced by consumers’ prior choices and by choice options that will be available to them in the future. Her research has won several awards, including Hillel Einhorn New Investigator Award (honorable mention), the American Marketing Association’s John A. Howard Dissertation Award, and the SCP-Sheth Doctoral Dissertation Award. She has published in leading marketing and psychology journals and has consulted for clients in airline, education, and high-tech industries.

Ravi Dhar is the George Rogers Clark Professor of Management and Marketing and Director of the Center for Customer Insights at the Yale School of Management. He is an expert in consumer behavior and branding, marketing management, and marketing strategy. His research involves using psychological and economic principles to investigate fundamental aspects about the formation of consumer preferences to understand and predict consumer behavior in the marketplace. In one research program, he examines how an initial choice influences subsequent choices. He is also interested in the processes of self-regulation and, specifically, the simultaneous pursuit of multiple goals. His work has been mentioned in BusinessWeek, the New York Times, Financial Times, the Wall Street Journal, the Economist, USA Today, and other popular media. He has been a visiting professor at HEC Graduate School of Management in Paris, at Erasmus University in the Netherlands, and at the Business Schools at Stanford and New York University. In addition, he has consulted to companies in a wide variety of industries, including financial services, high tech, and luxury goods. He has written more than 40 articles and serves on the editorial boards of leading marketing journals, such as Journal of Consumer Research, Journal of Marketing, Journal of Marketing Research, and Marketing Science.

Journal of Marketing Research, Volume 47, Number 6, December 2010
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Uzma Khan and Ravi Dhar
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