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Impact of bundle forms on change in consumers’ internal reference price IRP of bundle components (CD)

By: Banerjee, Prantosh J.
Material type: materialTypeLabelBookPublisher: Ahmedabad Indian Institute of Management Ahmedabad 2016Description: 289 p.Subject(s): Bundle component complementarityDDC classification: TH 2016-08 Summary: Abstract Consumers’ internal reference price (IRP) is an internal standard against which observed prices are compared. Promotions on individual products lead to change (reduction) in consumers’ IRP leading to lower purchase of products at regular price. Bundle offers (sale of two separate products together for a lower price) represent price reductions which are prolonged and therefore shift consumers’ IRP for bundle components downwards, thereby reducing long-term sustainability of bundle components. There is scarcity in literature on impact of different bundle forms which are economically equivalent on change in consumers’ IRP of bundle components. This research addresses this gap through five studies encompassing eight experiments (including one field experiment). The theoretical bases for the research include mental accounting theory; adaptation theory and assimilation-contrast theory; attribution theory; anchoring and adjustment; GLOMO processing model. Study1 demonstrates that consumers distribute promotion in pure bundle among bundle components based on shopping goals. Study2 establishes differential impact of bundle format (pure bundle, mixed-joint bundle & mixed-leader bundle) on change in consumers’ IRP of bundle components and purchase likelihood. Change in consumers’ IRP is lowest (purchase likelihood is highest) for mixed-joint bundle followed by mixed-leader bundle with pure bundle resulting in largest change in IRP and lowest purchase likelihood. Further, change in consumers’ IRP mediates the relationship between bundle form and purchase likelihood. In mixed-leader context, Study3 provides evidence that consumers’ change in IRP is greater (and purchase likelihood for bundle is lower) when discount is offered on tie-in bundle component as compared to when discount is offered on focal bundle component. Study4 demonstrates that change in consumers’ IRP is lower (and purchase likelihood is higher) for bundle components and bundle when bundle components are complementary as compared to when they are non-complementary. Study5 is a field experiment confirming findings of study2 for a bundle component through actual consumer purchase behavior. Findings of this research have significant theoretical and managerial implications. Thesis Advisory Committee Prof. Arvind Sahay Prof. Sanjeev Tripathi Prof. Kirti Sharda
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Table of Contents
Abstract…………………………………………………………………………….….………3
Acknowledgements……………………………………………………………….….………..5
List of Figures…………………………………………………………………….……………9
List of Tables…………………………………………………………………….…….……..10
List of Appendices……………………………………………………………….......……….11
Chapter 1: Introduction ……………………………………………………………...……….15
Chapter2: Review of Literature………………………………….…………………..………..23
Chapter 3: Motivation & Research Questions……………………..………………..………..41
Chapter 4: Theoretical Rationale…….………………………………..…..……….….……...45
Chapter 5: Study 1: Pure Bundles: Global or Local Processing..…..……..…..…….….…….55
Chapter 6: Study 2: Effect of Pure, Mixed-Joint & Mixed-Leader Bundles.…..…..…….…..63
Chapter 7: Study 3: Effect of discounting focal / tie-in bundle component..…..….…..……113
Chapter 8: Study 4: Effects of Bundle Component Complementarity…..…..…….………..129
Chapter 9: Study 5: Field Experiment……………………………………..….………..…...160
Chapter 10: Discussion …………………………………………………..……….…..…….169
References………………………………………………………………………….……….186
Appendices………………………………………………………………………….………198
9
List of Figures
Figure 2.1: Pure Bundle ………………………………………………….….…..…………..30
Figure 2.2: Mixed-Joint Bundle………………………………………..…..…...……………31
Figure 2.3: Mixed-Leader Bundle……………………………………..….…….….………..31
Figure 2.4: Prospect Theory Value Curve (Losses)…………………….……….….………..35
Figure 6.1: Pure Bundle: Two step process…………..………………………….……..…….66
Figure 6.2: Mixed-Joint Bundle: Two step process…...………………………..……………67
Figure 6.3: Prospect Theory based Value Curve (Gains)……,,,………………….….……...70
Figure 6.4: Change in IRP of Bundle: Pure Bundle versus Mixed-Joint Bundle ….……….75
Figure 6.5: Purchase Likelihood for Bundle: Pure Bundle versus Mixed-Joint Bundle …...77
Figure 6.6: Mediation effects: Change in consumers‟ IRP; Pure vs Mixed-Joint Bundle….79
Figure 6.7: Mixed-Leader Bundle: Two Step Process………………………………………82
Figure 6.8: Consumer Value function for Pure vs Mixed-Leader bundle ………………….84
Figure 6.9: Change in IRP of Bundle for Pure Bundle versus Mixed-Leader Bundle ….….90
Figure 6.10: Purchase Likelihood for Bundle: Pure Bundle versus Mixed-Leader Bundle...92
Figure 6.11: Mediation effects: ΔIRP; Pure vs Mixed-Leader Bundle…………….………..95
Figure 6.12: Prospect Theory based Value Curve……………………………….…………100
Figure 6.13: Change in IRP for Bundle: Mixed-Joint Bundle vs. Mixed-Leader Bundle….105
10
Figure 6.14: Purchase Likelihood: Mixed-Joint Bundle vs Mixed-Leader Bundle….……..108
Figure 6.15: Mediation Effects: ΔIRP; Mixed-Joint vs Mixed-Leader Bundle…….………110
Figure 7.1: Mixed-Leader bundle (tie-in) versus Mixed-Leader bundle (focal)…….……..115
Figure 8.1: Mixed-Joint bundle (complementary versus non-complementary) ……………145
Figure 10.1: Pure Bundle: Two-step Process: Adjustment followed by Attribution……….172
Figure 10.2: Mixed-Joint Bundle: Two-step Process: Attribution then Adjustment……….172
Figure 10.3: Mixed-Leader Bundle: Two-steps: Different Anchors then Adjustment……..173
Figure 10.4: ΔIRP for pure bundle, mixed-joint bundle and mixed-leader bundle ………..174
Figure 10.5: PL pure bundle, mixed-joint bundle and mixed-leader bundle ………………175
List of Tables
Table 2.1: Mixed-Joint Bundle ………………………………………………………………29
Table 2.2: Mixed-Leader Bundle………………………………………………….………….30
Table 9.1: Treatment Bundle and Control Bundle ………………………………...………..163


List of Appendices
Appendix 1.1
Maratha Samrat Fixed “Thali” offer
198
Appendix 1.2
Maratha Samrat a-la-carté Menu (Source Zomato.com)
199
Appendix 2.1
Summary of IRP research
200
Appendix 2.2
Summary of Studies on Consumer Evaluations of Bundling
202
Appendix 3.1
Common procedure for each experiment
205
Appendix 3.2
Dependent variable (i.e. ΔIRP) measurement
206
Appendix 3.3
Measurement of PL
207
Appendix 3.4
Details of Subjects
207
Appendix 3.5
Project Protocol approval from IRB
208
Appendix 4.1
Pre-test for Relative Importance of bundle components
209
Appendix 4.2
Pre-test for Complementarity of bundle components
209
Appendix 5.1
Paired Samples Test - Pure Bundles, Shopping Goal Bundle
210
Appendix 5.2
Paired Samples Test - Pure Bundles, Shopping Goal Jeans
210
Appendix 5.3
Paired Samples Test - Pure Bundles, Shopping Goal T-Shirt
210
Appendix 5.4
Change in IRP for different consumer shopping goals.
211
Appendix 5.5
ANOVA - change in IRP for different shopping goals
211
Appendix 5.6
Pure Bundle, Cronbach Alpha for change in IRP for Jeans
212
Appendix 5.7
Pure Bundle - Inter-item correlations change in IRP Jeans
212
Appendix 5.8
Pure Bundle - Cronbach Alpha for change in IRP for T-Shirt
212
Appendix 5.9
Pure Bundle - Inter-item correlations change in IRP T-Shirt
212
Appendix 5.10
Pre-test for Study 1
213
Appendix 6.1
Descriptive Statistics - Pure vs Mixed-Joint Bundle
217
Appendix 6.2
ANOVA - Pure Bundle vs Mixed-Joint Bundle
217
Appendix 6.3
Group Statistics - Pure vs Mixed-Joint Bundle
218
Appendix 6.4
T-test - Pure vs Mixed-Joint Bundle No Promotion
218
Appendix 6.5
Group Statistics - Pure Bundle vs Mixed-Joint Bundle
218
Appendix 6.6
T-test - Pure vs Mixed-Joint Bundle With Promotion
219
Appendix 6.7
Between-Subjects Effects - Pure vs Mixed-Joint Bundle
219
Appendix 6.8
Change in IRP for Pure Bundle vs Mixed-Joint Bundle
219
Appendix 6.9
PL – Descriptives - Pure Bundle vs Mixed-Joint Bundle
220
Appendix 6.10
PL – ANOVA - Pure Bundle vs Mixed-Joint Bundle
220
Appendix 6.11
PL - Group Statistics - Pure Bundle vs Mixed-Joint Bundle
221
Appendix 6.12
PL - T-test - Pure Bundle vs Mixed-Joint Bundle
221
Appendix 6.13
PL - Group Statistics - Pure Bundle vs Mixed-Joint Bundle
221
Appendix 6.14
PL - T-test - Pure Bundle vs Mixed-Joint Bundle
222
Appendix 6.15
PL- Between-Subjects Effects - Pure vs Mixed-Joint Bundle
222
Appendix 6.16
PL Plot - Pure Bundle vs Mixed-Joint Bundle
222
Appendix 6.17
Descriptive Statistics – Pure vs Mixed-Leader Bundle
223
Appendix 6.18
ANOVA - Pure Bundle vs Mixed-Leader Bundle
224
Appendix 6.19
Group Statistics - Pure vs Mixed-Leader Bundle
224
Appendix 6.20
T-test - Pure vs Mixed-Leader Bundle No Promotion
224
Appendix 6.21
Descriptive Statistics - Pure vs Mixed-Leader Bundle
224
Appendix 6.22
T-test - Pure Bundle vs Mixed-Leader Bundle
225
Appendix 6.23
Between-Subjects Effects - Pure vs Mixed-Leader Bundle
225
Appendix 6.24
Change in IRP for Pure Bundle vs Mixed-Leader Bundle
225
12
Appendix 6.25
PL - Descriptive Statistics - Pure vs Mixed-Leader Bundle
226
Appendix 6.26
PL – ANOVA - Pure Bundle vs Mixed-Leader Bundle
226
Appendix 6.27
PL - Group Statistics - Pure vs Mixed-Leader Bundle
227
Appendix 6.28
PL - T-test - Pure Bundle vs Mixed-Leader Bundle
227
Appendix 6.29
PL - Group Statistics - Pure vs Mixed-Leader Bundle
227
Appendix 6.30
PL - T-test - Pure Bundle vs Mixed-Leader Bundle
228
Appendix 6.31
PL - Between-Subjects - Pure vs Mixed-Leader Bundle
228
Appendix 6.32
PL Plot - Pure Bundle vs Mixed-Leader Bundle
228
Appendix 6.33
Descriptive Statistics -Mixed-Joint vs Mixed-Leader Bundle
229
Appendix 6.34
ANOVA - Mixed-Joint Bundle vs Mixed-Leader Bundle
229
Appendix 6.35
Group Statistics - Mixed-Joint vs Mixed-Leader Bundle
230
Appendix 6.36
T-test-Mixed-Joint vs Mixed-Leader Bundle - No Promotion
230
Appendix 6.37
Group Statistics - MJB vs MLB With Promotion
230
Appendix 6.38
T-test - MJB vs MLB in With Promotion
231
Appendix 6.39
Between-Subjects- Mixed-Joint vs Mixed-Leader Bundle
231
Appendix 6.40
Change in IRP for Mixed-Joint vs Mixed-Leader Bundle
231
Appendix 6.41
PL - Descriptive Statistics - MJB vs MLB
232
Appendix 6.42
PL – ANOVA - MJB vs MLB
232
Appendix 6.43
PL Group Statistics - MJB vs MLB No Promotion
233
Appendix 6.44
PL T-test - MJB vs MLB
233
Appendix 6.45
PL Group Statistics - MJB vs MLB With Promotion
233
Appendix 6.46
PL T-test - MJB vs MLB With Promotion
234
Appendix 6.47
PL Between-Subjects Effects - MJB vs MLB
234
Appendix 6.48
PL for Mixed-Joint Bundle vs Mixed-Leader Bundle
234
Appendix 6.49
Pure vs Mixed-Joint Bundle - Cronbach Alpha ΔIRP Jeans
235
Appendix 6.50
Pure vs Mixed-Joint -Inter-item correlations ΔIRP Jeans
235
Appendix 6.51
Pure vs Mixed-Joint Bundle - Cronbach Alpha ΔIRP T-Shirt
235
Appendix 6.52
Pure vs Mixed-Joint - Inter-item correlations ΔIRP T-Shirt
235
Appendix 6.53
Pure vs Mixed-Joint Bundle - Cronbach Alpha PL Jeans
236
Appendix 6.54
Pure vs Mixed-Joint - Inter-item correlations PL Jeans
236
Appendix 6.55
Pure vs Mixed-Joint - Cronbach Alpha PL T-Shirt
236
Appendix 6.56
Pure vs Mixed-Joint - Inter-item correlations PL T-Shirt
236
Appendix 6.57
Pure vs Mixed-Leader - Cronbach Alpha ΔIRP Jeans
237
Appendix 6.58
Pure vs Mixed-Leader - Cronbach Alpha ΔIRP T-Shirt
237
Appendix 6.59
Pure vs Mixed-Leader - Cronbach Alpha PL Jeans
237
Appendix 6.60
Pure vs Mixed-Leader - Cronbach Alpha PL T-Shirt
237
Appendix 6.61
Mixed-Joint vs Mixed-Leader - Cronbach Alpha ΔIRP Jeans
238
Appendix 6.62
Mixed-Joint vs Mixed-Leader-Cronbach Alpha ΔIRP TShirt
238
Appendix 6.63
Mixed-Joint vs Mixed-Leader - Cronbach Alpha PL Jeans
238
Appendix 6.64
Mixed-Joint vs Mixed-Leader - Cronbach Alpha PL T-Shirt
238
Appendix 6.65
Participant Informed Consent
239
Appendix 6.66
Instrument for Mixed-joint Bundle
240
Appendix 6.67
Pure Bundle & Mixed-Joint Bundle (NP) Mediation: Jeans
247
Appendix 6.68
Pure Bundle & Mixed-Joint Bundle (NP) Mediation: T-Shirt
248
Appendix 6.69
Pure Bundle & Mixed-Leader Bundle (NP) Mediation: Jeans
249
Appendix 6.70
Pure Bundle & Mixed Leader (NP) Mediation: T-Shirt
250
13
Appendix 6.71
Mixed-Joint & Mixed-Leader Bundle (NP) Mediation: Jeans
252
Appendix 6.72
Mixed-Joint & Mixed-Leader (NP) Mediation: T-Shirt
253
Appendix 7.1
Descriptive Statistics - MLB (Tie-In) vs MLB (Focal)
255
Appendix 7.2
ANOVA - Mixed-Leader (Tie-In) vs Mixed-Leader (Focal)
255
Appendix 7.3
Group Statistics - MLB (Tie-In) vs MLB (Focal)
256
Appendix 7.4
T-test - MLB (Tie-In) vs MLB (Focal) No Promotion
256
Appendix 7.5
Group Stats-MLB(Tie-In) vs MLB(Focal) With Promotion
256
Appendix 7.6
T-test - MLB (Tie-In) vs MLB (Focal) With Promotion
257
Appendix 7.7
Between-Subjects Effects - MLB (Tie-In) vs MLB (Focal)
257
Appendix 7.8
ΔIRP for Mixed-Leader (Tie-In) vs Mixed-Leader (Focal)
257
Appendix 7.9
PL - Descriptive Statistics – MLB (Tie-In) vs MLB (Focal)
258
Appendix 7.10
PL – ANOVA - MLB (Tie-In) vs MLB (Focal)
258
Appendix 7.11
Group Stats - MLB (Tie-In) vs MLB (Focal) No Promotion
259
Appendix 7.12
T-test - MLB (Tie-In) vs MLB (Focal) No Promotion
259
Appendix 7.13
Group Stats- MLB (Tie-In) vs MLB (Focal) With Promotion
259
Appendix 7.14
T-test - MLB (Tie-In) vs MLB (Focal) With Promotion
260
Appendix 7.15
Between-Subjects Effects - MLB (Tie-In) vs MLB (Focal)
260
Appendix 7.16
PL for MLB (Tie-In) vs MLB (Focal)
260
Appendix 7.17
MLB (Focal) vs MLB (Tie-in)- Cronbach Alpha ΔIRP Jeans
261
Appendix 7.18
MLB(Focal) vs MLB (Tie-in)-Cronbach Alpha ΔIRP TShirt
261
Appendix 7.19
MLB (Focal) vs MLB (Tie-in) - Cronbach Alpha PL Jeans
261
Appendix 7.20
MLB (Focal) vs MLB (Tie-in) - Cronbach Alpha PL T-Shirt
261
Appendix 7.21
Pretest 2 - Identification of Focal and Tie-in components
262
Appendix 7.22
Pre-test for Relative Importance of components
263
Appendix 8.1
Descriptive Stats–MLB (Complementary) vs MLB (Non-C)
264
Appendix 8.2
ANOVA - MLB (Complementary) vs MLB (Non-C)
264
Appendix 8.3
Group Statistics – MLB (C) vs MLB (NC) No Promotion
265
Appendix 8.4
T-test – MLB (C) vs MLB (NC) No Promotion
265
Appendix 8.5
Group Statistics - MLB (C) vs MLB (NC) With Promotion
265
Appendix 8.6
T-test – MLB (C) vs MLB (NC) With Promotion
266
Appendix 8.7
Between-Subjects Effects - MLB (C) vs MLB (NC)
266
Appendix 8.8
ΔIRP for MLB (C) vs MLB (NC)
266
Appendix 8.9
PL - Descriptive Statistics - MLB (C) vs MLB (NC)
267
Appendix 8.10
PL – ANOVA – MLB (C) vs MLB (NC)
268
Appendix 8.11
PL-Group Statistics - MLB (C) vs MLB (NC) No Promotion
268
Appendix 8.12
T-test – MLB (C) vs MLB (NC) No Promotion
268
Appendix 8.13
Group Statistics - MLB (C) vs MLB (NC) With Promotion
268
Appendix 8.14
T-test – MLB (C) vs MLB (NC) With Promotion
268
Appendix 8.15
Between-Subjects Effects - MLB (C) vs MLB (NC)
269
Appendix 8.16
PL MLB (C) vs MLB (NC)
269
Appendix 8.17
Descriptive Statistics - MJB (C) vs MJB (NC)
270
Appendix 8.18
ANOVA - MJB (C) vs MJB (NC)
270
Appendix 8.19
Group Statistics - MJB (C) vs MJB (NC)
271
Appendix 8.20
T-test - MJB (C) vs MJB (NC) No Promotion
271
Appendix 8.21
Group Statistics - MJB (C) vs MJB (NC) With Promotion
271
Appendix 8.22
T-test - MJB (C) vs MJB (NC) With Promotion
272
14
Appendix 8.23
Between-Subjects Effects - MJB (C) vs MJB (NC)
272
Appendix 8.24
ΔIRP MJB (C) vs MJB (NC)
272
Appendix 8.25
PL - Descriptive Statistics - MJB (C) vs MJB (NC)
273
Appendix 8.26
PL – ANOVA - MJB (C) vs MJB (NC)
273
Appendix 8.27
PL- Group Statistics - MJB (C) vs MJB (NC) No Promotion
274
Appendix 8.28
T-test - MJB (C) vs MJB (NC) No Promotion
274
Appendix 8.29
Group Statistics - MJB (C) vs MJB (NC) With Promotion
274
Appendix 8.30
T-test - MJB (C) vs MJB (NC) With Promotion
275
Appendix 8.31
Between-Subjects Effects – MJB (C) vs MJB (NC)
275
Appendix 8.32
PL - MJB (C) vs MJB (NC)
275
Appendix 8.33
MLB (C) vs MLB (NC) - Cronbach Alpha ΔIRP Jeans
276
Appendix 8.34
MLB (C) vs MLB (NC) - Cronbach Alpha ΔIRP T-Shirt
276
Appendix 8.35
MLB (C) vs MLB (NC) - Cronbach Alpha PL Jeans
276
Appendix 8.36
MLB-Comple vs Non-comple- Cronbach Alpha PL TShirt
276
Appendix 8.37
MJB- Comple vs Non-comple- Cronbach Alpha ΔIRP Jeans
277
Appendix 8.38
MJB - Comple vs Non-comple - Cronbach Alpha ΔIRP_TS
277
Appendix 8.39
MJB – Comple vs Non-comple- Cronbach Alpha PL_Jeans
277
Appendix 8.40
MJB - Comple vs Non-comple - Cronbach Alpha PL_TShirt
277
Appendix 8.41
Pretest3–Identify comple/non-complementary components
278
Appendix 8.42
Pre-test for Complementarity of components
279
Appendix 9.1
Treatment and Control
280
Appendix 9.2
Cross-tabulation - Form vs Purchase - Count
280
Appendix 9.3
Cross-tabulation - Form vs Purchase - Percentage
280
Appendix 9.4
Chi-Square Test - Form vs Purchase
280
Appendix 9.5
Between-subjects effects ΔIRP for Coffee Mug
281
Appendix 9.6
Marginal Means Plot Δ IRP for Coffee Mug
281
Appendix 9.7
Descriptive Statistics for change in IRP in Tol Mol Ke Bol
282
Appendix 9.8
ANOVA - Change in IRP in Tol Mol Ke Bol
282
Appendix 9.9
Group Stats-Difference in difference ΔIRP_CM – ΔIRP_TC
283
Appendix 9.10
T-test difference in difference - ΔIRP_CM – ΔIRP_TC
283
Appendix 9.11
Field Experiment Funding Approval
284
Appendix 10.1
Summary of Hypotheses
286

Abstract
Consumers’ internal reference price (IRP) is an internal standard against which observed prices are compared. Promotions on individual products lead to change (reduction) in consumers’ IRP leading to lower purchase of products at regular price. Bundle offers (sale of two separate products together for a lower price) represent price reductions which are prolonged and therefore shift consumers’ IRP for bundle components downwards, thereby reducing long-term sustainability of bundle components. There is scarcity in literature on impact of different bundle forms which are economically equivalent on change in consumers’ IRP of bundle components. This research addresses this gap through five studies encompassing eight experiments (including one field experiment). The theoretical bases for the research include mental accounting theory; adaptation theory and assimilation-contrast theory; attribution theory; anchoring and adjustment; GLOMO processing model. Study1 demonstrates that consumers distribute promotion in pure bundle among bundle components based on shopping goals. Study2 establishes differential impact of bundle format (pure bundle, mixed-joint bundle & mixed-leader bundle) on change in consumers’ IRP of bundle components and purchase likelihood. Change in consumers’ IRP is lowest (purchase likelihood is highest) for mixed-joint bundle followed by mixed-leader bundle with pure bundle resulting in largest change in IRP and lowest purchase likelihood. Further, change in consumers’ IRP mediates the relationship between bundle form and purchase likelihood. In mixed-leader context, Study3 provides evidence that consumers’ change in IRP is greater (and purchase likelihood for bundle is lower) when discount is offered on tie-in bundle component as compared to when discount is offered on focal bundle component. Study4 demonstrates that change in consumers’ IRP is lower (and purchase likelihood is higher) for bundle components and bundle when bundle components are complementary as compared to when they are non-complementary. Study5 is a field experiment confirming findings of study2 for a bundle component through actual consumer purchase behavior. Findings of this research have significant theoretical and managerial implications.

Thesis Advisory Committee

Prof. Arvind Sahay
Prof. Sanjeev Tripathi
Prof. Kirti Sharda

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