Parts in the Whole: Compensation versus Spillover Effects in Judgments of Bundled Products

• Main Authors: Hong, Jennifer Seokhwa, Meyvis, Tom, Bonezzi, Andrea
• Format: Conference Proceeding
• Language: English
• Subjects: Consumer behavior; Preferences
• ISSN: 0098-9258

The ubiquity of product bundles in the marketplace has yielded a substantial amount of research on how consumers evaluate product bundles as a whole (Adams and Yellen 1976; Bakos and Brynjolfsson 1999). However, relatively little attention has been paid to how consumers assess the parts in the whole-that is, the component products in the bundle. Research in this domain implies that consumers' valuation of one bundled product spills over onto their valuation of the other bundled product. Accordingly, researchers often suggest that firms be cautious about bundling one product with another objectively inferior one (Popkowski-Leszczyc et al. 2007; Yadav 1994). We challenge this proposition by documenting a novel case where bundling a substitute product with another inferior substitute may not hurt companies but help them. We propose that a product is evaluated more favorably when it is bundled (vs. not bundled) with an inferior substitute product. We further show that this effect is driven by consumers' trust in the market, which stems from the belief that firms supply offers that meet consumers' expectations to survive in a competitive market (Schrift, Kivetz, and Netzer 2016). Thus, consumers trust companies to deliver a reasonable standard of value with their offerings, leading them to believe that if an offer is inferior in a particular attribute, it must excel in some other attributes (Chernev, 2007; Chernev and Carpenter 2001). Because consumers perceive a bundle of products as a single offer, if one does not work, consumers may infer that the other should work for the entire bundle to be minimally functional. Nonetheless, consumers may not rely on this belief when making inferences about bundled complements; if one is considered ineffective, it is futile to believe that another is effective because a bundle cannot serve its function without all its components. We tested our hypothesis across four studies. In Study 1 (n =406), we provide initial evidence for the differential effect of bundling substitute versus complementary products using a 2 (bundling: bundled vs. separate) X 2 (product type: substitutes vs. complements) between-subjects design. Participants were given a shopping list containing vitamin B2 (B2 henceforth), niacin, and other filler products. Participants in the bundled condition saw B2 and niacin packaged together as a bundle, while those in the separate condition saw the products separately. We informed participants that both products