Making the Price of Indulgence Right

Three groups of consumers were offered an opportunity to buy a bundle of items — a box of chocolates and a set of binders — at a discount. Those who were told that the discount was offered on the chocolates were more likely to buy the bundle.

Offering consumers a price discount if they purchase a bundle of goods or services together is a common promotional tool. While conventional marketing practice has been to offer bundles that consist of complementary items — for example, a beverage, sandwich and French fries in a fast-food restaurant — the practice of offering cross-category bundles is growing. One reason: In online retail settings, technology makes it feasible for websites such as Amazon.com to bundle different types of products easily.

What happens when consumers face a bundle that consists of one item that is desired more for pleasure and indulgence — what we call a hedonic item — and one that is more practical and functional in nature? Three experiments we conducted, which were described in detail in the December 2010 issue of The Journal of Marketing Research, suggest that businesses considering offering such bundles will achieve better results if they associate the discount with the price of the more pleasurable, less utilitarian item in the bundle.

For example, in one study we offered consumers an opportunity to buy discounted products. The items were a box of chocolates — a pleasurable item — and a utilitarian set of three binders. The individual options were each offered at $6. However, an additional $2 discount was offered on the bundled purchase of both the items. Consumers were randomly divided into three groups. The first group was told that they could save $2 on the chocolates if they also purchased the binders. The second group was told that they could save $2 on the binders if they also purchased the box of chocolates. The third group was told that they could save $2 on the total purchase for buying both the binder and the box of chocolates. Although the amount of discount was the same across the three groups, the purchase results showed that the way the discount was framed had a significant impact on sales of the bundle. While 82% purchased the bundle when the discount was framed as savings on the hedonic chocolates, only 52% purchased the bundle when the discount was framed as savings on the utilitarian binders. When the discount was offered on the total purchase, 61% chose to buy the bundle.

These findings are consistent with previous research that has shown that consumers often experience guilt when purchasing items for personal pleasure and indulgence. Applying the discount to the more pleasurable product in a bundle apparently allows consumers to reduce the guilt associated with the purchase of such products. However, since no guilt is associated with the purchase of utilitarian items that fulfill basic needs, linking the discount to the utilitarian component of the bundle is less effective at encouraging purchases. The results also suggest that although people can theoretically reallocate savings however they want, the discount earned remains in some way associated in their minds with the item with which it was originally offered.

This research also has implications for items purchased as gifts, because prior research has indicated that consumers do not experience guilt when purchasing pleasurable products as gifts for other people. As a result, marketers of products such as flowers, wine, magazine subscriptions and jewelry should be able stimulate sales by offering instant discounts for items purchased for the buyer’s own use when a gift is purchased at full price. For example, a magazine publisher might suggest that a reader buy someone a gift subscription — and get 50% off on his or her own personal subscription by doing so. A florist, similarly, might offer customers six free lilies for themselves when they purchase a dozen long-stemmed roses as a gift.