Article
To read the full-text of this research, you can request a copy directly from the authors.

Abstract

This study investigates the strategic influence of product complementarity and advertising on the success of bundling products. We use a profit maximization model to show that when a firm sells bundled products, both the product complementarity and advertising significantly impact the performance of bundled products. The bundling strategy with advertising can help firm achieve higher performance than the bundling strategy without advertising. However, the price discount to the identical products must be attractive to customers and the degree of product complementarity to the complementary products must be large enough, and then the bundling strategy with advertising can obtain a success in the market. Furthermore, our results also show that when the degree of the complementarity between two products increases, firm should invest less on advertising to promote the bundled products. Based on our results, we propose optimal marketing strategies for firms to adopt. Firm managers can utilize our findings to plan their bundling strategies wisely.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the authors.

... Product bundling defines integrated products that provides extra value to the customers and price bundling consists of a package sold at a discount rate, without any integration of the goods and/or services involved (Adomavicius et al. 2015;Giri et al. 2020;Jeitschko et al. 2017;Vamosiu 2018). In addition, depending on the number of items bundled, the nature of such items and the degree of variations, bundling can also reduce consumer costs (Yan et al. 2014). ...
... When a manufacturer adopts an appropriate bundling approach, it is essential to adjust their sales strategy in response to the bundling. However, in today's competitive business environment, it is typical that a retailer will try to sell bundled products produced by two or more manufacturers to attract more demand (Yan et al. 2014). Therefore, in order to maximise its selling, the firm involves an advertising campaign to promote the bundling products. ...
... Most studies, to date, focus on various models of bundling in supply chain management (e.g., Arora 2008;Cataldo and Ferrer 2017;Giri et al. 2020;Vamosiu 2018;Lin et al. 2020); though very limited studies have addressed bundling price policy in the supply chain under competition (Chakravarty et al. 2013;Chen and Wang 2015;Ma and Mallik 2017;Vamosiu 2018). For instance, Yan et al. (2014) discuss the bundling pricing policy under a single manufacturer and retailer. In addition, Vamosiu (2018) analysed a two-product supplier's incentives to bundle their products considering pure bundling, mixed bundling and independent bundling under imperfect competition against one of their products. ...
Article
Full-text available
The paper studies product bundling in a duopoly supply chain network under the influence of different power-balance structures, bundling decisions and advertising efforts on total supply chain profit. Mathematical models comprising two manufacturers and a single retailer are developed to capture the impact of bundling policy and advertisement strategy under three power-balance structures, namely Manufacturer Stackelberg, Retailer Stackelberg and Vertical Nash. Following game theory models and numerical examples, the study found that the total profit of the supply chain is undifferentiated under the manufacturer Stackel-berg and Vertical Nash case in the manufacturer bundling and retailer bundling strategies. However, total supply chain profit under manufacturer bundling strongly dominates under retailer bundling in Retailer Stackelberg and Vertical Nash, and remains valid under multiple settings of market size, price elasticity and advertising elasticity. It is also found that manufacturer bundling is significantly affected by advertising effort compared to retailer bundling. The study contributes to the literature interfacing supply chain and marketing by studying bundling policy and advertising strategy simultaneously for homogenous products, under various power-balance structures and price competition.
... Menurut (Estelami, 1999) barang komplementaritas adalah barang yang memiliki manfaat antarbarang lainya.; (Yan, Myers, Wang, & Ghose, 2014) barang komplementaritas adalah barang yang memiliki manfaat seutuhnya apabila dipasangkan secara bersama-sama. ...
... Dalam penelitian yang dilakukan oleh Mantovani (2013) terdapat hubungan barang komplementaritas dengan product bundling (Yan & Bandyopadhyay, 2011) terdapat hubungan dari barang komplementaritas dengan price bundling. Dalam studi yang dilakukan oleh (Yan et al., 2014) product bundling dengan yang memiliki nilai komplementaritas dapat memperkuat niat membeli konsumen. (Estelami, 1999) ; (Yan et al., 2014) membagi beberapa indikator penyusun barang komplementaritas; antara lain,kesamaan kegunaan, waktu, distribusi, dan keuntungan. ...
... Dalam studi yang dilakukan oleh (Yan et al., 2014) product bundling dengan yang memiliki nilai komplementaritas dapat memperkuat niat membeli konsumen. (Estelami, 1999) ; (Yan et al., 2014) membagi beberapa indikator penyusun barang komplementaritas; antara lain,kesamaan kegunaan, waktu, distribusi, dan keuntungan. ...
Article
Full-text available
This research aim to examine the affects of price bundling, product bundling on purchase intention and complementary product as moderating variable in convenience store. Sample was taken with purposive method as much 160 sample in questionnaire survey with closed question and 5-point likert scale. the collected data was processed using SmartPLS02. As the result of hyphoteis test are H1 accepted, which means that the price bundling variable has a significant on purchase intention. H2 is accepted, which means product bundling variable has a significant on purchase intention. H3 is accepted, which means complementary product has moderating effect on on relationship of price bundling to purchase intention. H4 is rejected, which means complementary product can’t be moderating variable on relationship of product bundling to purchase intention. Based on the result, price bundling and product bundling has a signinficant effect on purchase intention.
... Product bundling defines integrated products that provides extra value to the customers and price bundling consists of a package sold at a discount rate, without any integration of the goods and/or services involved (Adomavicius et al. 2015;Giri et al. 2020;Jeitschko et al. 2017;Vamosiu 2018). In addition, depending on the number of items bundled, the nature of such items and the degree of variations, bundling can also reduce consumer costs (Yan et al. 2014). ...
... When a manufacturer adopts an appropriate bundling approach, it is essential to adjust their sales strategy in response to the bundling. However, in today's competitive business environment, it is typical that a retailer will try to sell bundled products produced by two or more manufacturers to attract more demand (Yan et al. 2014). Therefore, in order to maximise its selling, the firm involves an advertising campaign to promote the bundling products. ...
... Most studies, to date, focus on various models of bundling in supply chain management (e.g., Arora 2008;Cataldo and Ferrer 2017;Giri et al. 2020;Vamosiu 2018;Lin et al. 2020); though very limited studies have addressed bundling price policy in the supply chain under competition (Chakravarty et al. 2013;Chen and Wang 2015;Ma and Mallik 2017;Vamosiu 2018). For instance, Yan et al. (2014) discuss the bundling pricing policy under a single manufacturer and retailer. In addition, Vamosiu (2018) analysed a two-product supplier's incentives to bundle their products considering pure bundling, mixed bundling and independent bundling under imperfect competition against one of their products. ...
Article
Full-text available
The paper studies product bundling in a duopoly supply chain network under the influence of different power-balance structures, bundling decisions and advertising efforts on total supply chain profit. Mathematical models comprising two manufacturers and a single retailer are developed to capture the impact of bundling policy and advertisement strategy under three power-balance structures, namely Manufacturer Stackelberg, Retailer Stackelberg and Vertical Nash. Following game theory models and numerical examples, the study found that the total profit of the supply chain is undifferentiated under the manufacturer Stackelberg and Vertical Nash case in the manufacturer bundling and retailer bundling strategies. However, total supply chain profit under manufacturer bundling strongly dominates under retailer bundling in Retailer Stackelberg and Vertical Nash, and remains valid under multiple settings of market size, price elasticity and advertising elasticity. It is also found that manufacturer bundling is significantly affected by advertising effort compared to retailer bundling. The study contributes to the literature interfacing supply chain and marketing by studying bundling policy and advertising strategy simultaneously for homogenous products, under various power-balance structures and price competition.
... Venkatesh and Kamakura (2003) [2] studied the optimal pricing of complementary products in the monopoly market under different sales strategies, and analyzed the effects of the marginal cost level and degree of complementarity on three pricing strategies: pure separate pricing, pure bundle pricing and mixed bundle pricing. Chris et al. (2013) [3] studied the bundling pricing and advertising investment of complementary products based on the linear price elastic demand function. The study found that when the price discount is enough to attract customers and the complementarity between the products is adequate, advertising, while implementing the bundling strategy, can improve the enterprise's operation performance. ...
... Venkatesh and Kamakura (2003) [2] studied the optimal pricing of complementary products in the monopoly market under different sales strategies, and analyzed the effects of the marginal cost level and degree of complementarity on three pricing strategies: pure separate pricing, pure bundle pricing and mixed bundle pricing. Chris et al. (2013) [3] studied the bundling pricing and advertising investment of complementary products based on the linear price elastic demand function. The study found that when the price discount is enough to attract customers and the complementarity between the products is adequate, advertising, while implementing the bundling strategy, can improve the enterprise's operation performance. ...
Article
Full-text available
The environmental awareness of consumers and enterprises has gradually increased, and green production and green consumption have become the main theme of social economy. On the other hand, the complementary product market has become an important source of competitive advantage for enterprises. Considering a complementary product supply chain, and taking account of the consumers’ environmental awareness and the green subsidies provided by the government, this paper examines members’ decisions in relation to four contract models based on game theory. By solving the model, it is shown that the government’s green subsidy plan improves the green degree of subsidized products and complementary products. Furthermore, compared to wholesale price contracts, revenue-sharing and cost-sharing contracts motivate manufacturers to improve the greenness of subsidized products, and they achieve a Pareto improvement for the whole supply chain and its members, when the contract parameters are appropriate. Numerical experiments also reveal that both the greenness of the complementary products and the profit for members increase with the green innovation spillover effect as a result of the complementary products and the scale of green consumers with environmental awareness in the market. This study provides good guidance for decision-making concerning the complementary product supply chain, and further contributes to environmental protection.
... A bundle can consist of multiple units of the same products or a combination of different products (Beheshtian-Ardakani et al., 2018;Liu et al., 2020aLiu et al., , 2020b. A bundle may also reduce consumer costs, depending on the number of bundled products, their nature and their degree of variations (Yan et al., 2014). The sales to the end consumers must occur exclusively through the retailer. ...
... Based on the perspectives of service quality and price, this paper extends OC research by considering the effects of integrated and non-integrated bundling on supply chain decisions. The bundling of product/service has been identified as an important strategy for reducing consumer costs (Yan et al., 2014). Furthermore, several studies have indicated the importance of OC (Zhang et al., 2019;Huang and Jin, 2020;Li et al., 2020;Park et al., 2021b;Mandal et al., 2021) and MB and RB (Ma and Mallik, 2017;Li et al., 2020;Saini et al., 2019;Heydari et al., 2020) on supply chain profit separately. ...
Article
Purpose – Many e-commerce firms suffer from high returns because of inaccurate and incomplete product information. Omnichannel and bundling settings can help firms improve operational efficiency and lower returns costs. However, no studies have been conducted on omnichannel supply chains considering bundling strategies. The purpose of this study is to examine the comparison between test-in-store-and-buy-online (TSBO) and online retail, comparing manufacturers’ bundling with retailers’ bundling. Design/methodology/approach – The supply chain discussed here consists of two competitive manufacturers and one retailer. The retailer sells both manufacturers’ products online and displays one manufacturer’s product in a showroom who bears the display cost. Stackelberg game theory is used to develop mathematical models that help manufacturers and retailers make the most effective decisions. Here, the manufacturer is the Stackelberg leader, while the retailer is the follower. Using the backward induction approach, the authors determined the optimal values for selling price, wholesale price and service effort level. Findings – The results show that the total TSBO retailing profit under manufacturer bundling is highest when the second manufacturer integrates with the online retailer. The result additionally establishes that when the bundling cost exceeds a certain threshold (1.5), the total profit is higher for the non-integrated type of supply chain channel as compared to the integrated retailer bundling-based configuration. Practical implications – The operations and logistics manager will likely undertake the TSBO omnichannel strategy during manufacturers bundling and retailer bundling under the integrated strategy. Originality/value – The main contribution of the study is to examine the effect of TSBO retailing on supply chains profit and individual decision-making under different bundling strategies. The authors developed different mathematical models in the TSBO retailing and bundling context and extended the earlier work in the area of integration frame.
... Liu and Chou (2015) also argued that customers perceive fairness and lessen their comparison between transactions when dynamic bundling is offered compared to price bundling. For bundling to be successful, the products complementing the promoted product require a high level of complementarity and the promotion must be enticing to customers (Yan et al., 2014). Yan et al. (2014) even stressed that advertised bundling scheme gives better performance than those of non-advertised bundling approach. ...
... For bundling to be successful, the products complementing the promoted product require a high level of complementarity and the promotion must be enticing to customers (Yan et al., 2014). Yan et al. (2014) even stressed that advertised bundling scheme gives better performance than those of non-advertised bundling approach. ...
Article
Traditional retailing remains to be the most utilized platform for fast-moving consumer goods transactions. The need to understand the dynamics between the physical retail stores and how it affects consumer behavior is still of utmost importance. The study aims to determine retailing elements that are most influential in terms of increased spending. The study led to the following insights: on a non-controlled and controlled environment in terms of spending cap, the most prominent retailing element in terms of influence is the presence of directional signages with the degree of importance at 25.08 and 22.38 respectively, while in a controlled environment, high level of product assortment follows with the degree of importance at 16.47. As a point of parity between the two spending environments, presence of product bundle as a retail element, replacing the high level of product assortment, is influential on uncapped spending scenario with the degree of importance at 21.88, while being one of the least influential in capped spending with the degree of importance at 6.26. The results were gathered via conjoint analysis statistical method covering eight distinct retail elements through a nationwide sampling dispersal. Keywords: promotion, atmospheric, point-of-purchase display, value-added service, purchase behavior, conjoint analysis, fast-moving consumer goods, retailing
... In recent years, firms have increasingly offered customers bundled products and services (Foubert and Gijsbrechts 2007;Stremersch and Tellis 2002;Yan et al. 2014). Bundling refers to the practice of selling two or more products and/or services in a single "package," typically for a single (special) price and/ or a convenience to customers (Guiltinan 1987;Yadav 1994). ...
... The bundle may include several physical products (e.g., a computer and a monitor), several services (e.g., traveling packages that include hotels and flights), or a mix of products and services (e.g., a washing machine and its maintenance services). Bundles of products and/or services potentially create value for customers as well as increase firms' profitability (Doha, Ghasemaghaei, and Hassanein 2017;Ranaweera and Heikki 2017;Sarin, Sego, and Chanvarasuth 2003;Stremersch and Tellis 2002;Yadav 1994;Yan et al. 2014). In addition, customers who purchased bundles were found to defect from their service providers less than customers who purchased separate offerings (Ranganathan, Seo, and Babad 2006). ...
Article
Full-text available
Many service providers offer supplementary products related to their ongoing services (e.g., fitness centers offer fitness smartwatches). In seven studies, the authors show that the payment method for such supplementary products (multiple payments vs. a single lump sum) affects customers’ tendency to defect from the provider’s core service. Specifically, when customers pay for add-ons in multiple payments—provided that (1i) they perceive the add-on as being bundled with the core service, and (ii2) they payment period has an endpointend point—they are initially less likely to defect from the service provider than when they pay in a single payment. Over time, however, as payments are made, this gap closes, such that defection intentions under the two payment methods eventually become similar. The authors propose that This this phenomenon is proposed to reflects “commitment projection,”, wherein a decrease in customers’ commitment to the add-on product over time is projected onto customers’ their commitment to the service provider. These findings carry important managerial implications, given that many service providers offer add-on products in multiple-payment plans, and that customers’ defection decisions substantially affect firms’ profitability.
... Complementarity Shankar et al. (2009, p. 96) defined complementarity as the increase in value when the customer uses the bundle components together. Multiple studies indicate that retailers can increase profits by bundling complementary products (Venkatesh and Kamakura, 2003;Yan et al., 2014). Venkatesh and Kamakura (2003) showed that customers were willing to pay more for the bundle of complements than for standalone products. ...
... Venkatesh and Kamakura (2003) showed that customers were willing to pay more for the bundle of complements than for standalone products. Yan et al. (2014) informed that the degree of product complementarity significantly impacts the bundling strategy. However, Taleizadeh et al. (2017) posited that when product complementarity increased, a mixed bundling strategy (i.e. ...
... In parallel, the phenomenon of product bundling has been studied in both economics and marketing fields [Bakos and Brynjolfsson 1999;Derdenger and Kumar 2013;Garfinkel et al. 2006;Stremersch and Tellis 2002;Yan et al. 2014]. These studies have distinguished different types of product bundles, and found that the relationships between products (e.g., complements and substitutes) could influence the performance of product bundling. ...
... Bakos and Brynjolfsson [1999] found that bundling unrelated information goods could be profitable, and they also analyzed the influence of complements and substitutes on product bundling. Yan et al. [2014] revealed that product complementarity significantly influence the performance of product bundles. Derdenger and Kumar [2013] studied product bundling from the perspective of customer valuations with dynamic settings, and they also examined customer segmentation in affecting the effectiveness of product bundling. ...
Product bundling is a marketing strategy that offers several products/items for sale as one bundle. While the bundling strategy has been widely used, less efforts have been made to understand how items should be bundled with respect to consumers' preferences and buying motives for product bundles. This article investigates the relationships between the items that are bought together within a product bundle. To that end, each purchased product bundle is formulated as a bundle graph with items as nodes and the associations between pairs of items in the bundle as edges. The relationships between items can be analyzed by the formation of edges in bundle graphs, which can be attributed to the associations of feature aspects. Then, a probabilistic model BPM (Bundle Purchases with Motives) is proposed to capture the composition of each bundle graph, with two latent factors node-type and edge-type introduced to describe the feature aspects and relationships respectively. Furthermore, based on the preferences inferred from the model, an approach for recommending items to form product bundles is developed by estimating the probability that a consumer would buy an associative item together with the item already bought in the shopping cart. Finally, experimental results on real-world transaction data collected from well-known shopping sites show the effectiveness advantages of the proposed approach over other baseline methods. Moreover, the experiments also show that the proposed model can explain consumers' buying motives for product bundles in terms of different node-types and edge-types.
... According to Harris and Blair (2012), if consumers fail to process information about a bundle discount, optimal bundle pricing may be affected from the retailer's perspective (see also Drumwright (1992)). Another important aspect, according to Yan et al. (2014), is that the complementarity of the price discount to the identical products must be attractive to customers and the degree of product complementarity to the complementary products must be large enough. ...
... Concerning implementation of bundling strategies in the Portuguese insurance sector, it seems that sales managers should pay special attention to detection of the primacy effect, which could be used as an anchor element in sales (Yadav, 1994). Bundling strategies are also an important strategy to improve consumer services management (similar results were obtained by Yan et al. (2014)). ...
Sales management plays an important role in firms' profit. Its main goal is to determine the best time to present insurance customers with prices, insurers, bundling strategies, and the intermediary's recommendation. In this study, a triangular approach was used. For attribute selection, three focus groups were performed with insurance customers and intermediaries. Conjoint analysis was carried out by presenting the attributes in three different orders. Primacy and recency effects were detected; a transfer or anchor effect was also found related to the importance of the attributes preceding and succeeding a given attribute. According to the findings, salespeople can improve their approach to customers by decreasing the importance given to price and increasing the positive impact of bundling strategies and the intermediary's recommendation in sales. Although the order of attribute presentation has previously been analyzed, this is the first study to examine this issue in non-life insurance products, providing useful information to insurance salespeople and marketing managers for a better understanding of insurance customers’ buying decision process.
... Dalam konteks lingkungan bisnis semasa pandemi seperti ini, sangat penting penentuan strategi untuk mengikat hati konsumen untuk membeli. Bahkan, berbagai upaya untuk menjual produk secara paket akan dapat mendorong lebih banyak permintaan (Yan, Myers, Wang, & Ghose, 2014). Tentu saja, strategi price bundling bukanlah satu-satunya strategi untuk menarik pembelian pelanggan. ...
Article
Full-text available
Penurunan produktifitas bisnis pada semua sektor sebagai akibat pandemic covid-19 telah mendorong para pelaku bisnis untuk menetapkan berbagai strategi pengembangan bisnisnya. Kebijakan pembatasan aktivitas masyarakat diluar selama pandemic telah memberikan dampak negatif pada sektor bisnis kuliner dan salah satu industri yang terdampak yaitu The Mill Restaurant Bali. Ada banyak strategi yang dapat dilakukan untuk meningkatkan penjualan produk bisnis kuliner dan salah satunya yang banyak dibahas yaitu strategi price bundling. Oleh karena itu, studi ini dilakukan untuk mengetahui sejauh mana pengaruh sales promosi dengan cara price bundling terhadap keputusan pembelian pada masa pandemi covid 19 di Bali khususnya di The Mill Restaurant Bali. Metode analisis yang digunakan untuk menganalisis pengaruh variabel price bundling adalah dengan menggunakan analisis regresi linier sederhana dengan bantuan program statistik SPSS for windows versi 25. Hasil studi ini mengungkapkan bahwa terdapat pengaruh positif price bundling terhadap keputusan pembelian pelanggan di The Mill Restaurant. Selain itu, price bundling hanya memberikan kontribusi sebesar 22,5% mendorong keputusan pembelian pelanggan. artinya, masih ada factor lain yang dimungkinkan mendorong keputusan pembelian produk restoran oleh para konsumen. Studi ini memberikan implikasi penting bagi pelaku bisnis kuliner untuk menerapkan strategi price bundling dalam bisnis kulinernya.
... The studies found that the effect of the advertisement spend (AS) vary on the multiple dimensions and sources of the banking (Lichtenthal, Yadav and Donthu, 2006). The customer perception of the advertisement spend judges the quality and the outreach of the financial services (Rezitis, 2010;Yan et al., 2014). Many research studies statistically computed a significant positive correlation between the quantum of the advertisement spend and quality of the services and outreach (Nikabadi, Safui and Agheshlouei, 2015). ...
Article
Full-text available
The study investigated to remedy the research gap of measuring the moderating effect of advertising spend on consumer adoption behavior of Islamic banking at the bottom of the pyramid (BOP) market of Pakistan. Cross-sectional research data collected from a total of 300 respondents of which 267 (89%) were useful to analyze the test on the framework of the research. SEM approach was used to test the hypothesized relationship of the framework in two sequential steps wherein the 1st step the reliability and validity analysis was performed and in the 2nd step sequential structural analysis among the variables were conducted with and without moderation. The empirical analysis confirmed a positive direct relationship of Perceived Usefulness (PU), Perceived Ease of Use (PEOU), and Advertising Spend (AS) on the adoption of Islamic banking (AIB) in the Bottom of the Pyramid Market. AS further confirmed the hypothesized relationships of the variables through increased individual predicting power of the PU and PEOU on the AIB with an overall effect size of f 2 value of 0.565. The overall adoption value of the r2 increased from simple moderation of 0.482 to moderating r2 value of 0.669 thus depicting 18.7 percent interaction effect of the AS. The study suggests that the advertising spends on marketing communication practices should be well-focused by the managers to penetrate in the BOP market of Pakistan. Moreover, future research can eliminate the limitation of the cross-sectional analysis and generalizability of the results as a functional probability in the other regional settings and industrial sectors by adding more variables to predict the adoption behavior with different roles. The consumer adoption behavior of the low-income markets has not yet been examined for Islamic banking in Pakistan. The research is useful for the industry to keep pace with the competition by focusing on the advertising and communication practices in this industry
... It has become popular for firms to use product bundling in the market (Yan et al., 2014). Our findings reported here may provide several inputs that can be used in creating favorable perceptions of the product bundle. ...
Article
Full-text available
This study demonstrates that perceived hierarchy (high vs. low) from bundled products depend on the darkness of their color (darker vs. lighter). Results from 11 experiments show that consumers infer a darker‐colored product as a higher hierarchical product (HHP), relative to the otherwise identical lighter‐colored product of the same hue and saturation. We further establish that perceived dominance mediates this association: dark colors signal dominance. This study also demonstrates several downstream outcomes of the effect of darkness on hierarchy perceptions: consumers prefer product bundles where an HHP is colored darker than a lower hierarchical product. Furthermore, in the final study, we establish that this effect extends to three‐product bundles and is moderated by presentation mode.
... In this paper, we consider such a market setup where the retailer orders two complementary perishable products, which are susceptible to logistics uncertainty. Plenty of researchers have investigated bundle policy for two complementary durable products and demonstrated that it can increase the profit when a firm sells its products under this policy (Girju et al., 2013;Yan et al., 2014;Cao et al., 2015). Predictable or accidental logistics shortage of bundled perishable products may cause higher cost because of the absence of information, or because of the unplanned de-bundling (i.e., separate) decision with repricing. ...
Article
With the increasing popularity of online grocery shopping platforms, more and more retailers are starting to bundle perishable products for marketing advantages. Accidental shortage of bundled perishable products increases both cost and waste. In this research, we propose a physical Internet-enabled real-time system for a retailer that sells two complementary perishable products. Based on the physical Internet data, we consider both bundling and separate policies with repricing strategies. In various model setups, the analytical results show that the physical Internet offers valuable real-time information that generates insights for the retailer especially when the logistics uncertainty is high. Specifically, a higher bundle discount makes the firm tend to adopt bundling policy to increase the market demand. Whereas serious logistics accident occurs, the retailer would rather quickly switch to separate selling policy and reprice the products. We extend the numerical analysis by comparing the profits with and without information captured via Physical Internet to provide managerial guidance when the retailer evaluates the return on investment of such a system.
... Previous research also provides accurate and concise terminology for different types of product and service bundles. Investigated topics have included the role of complementarity and substitutability of the bundled services (McAfee et al., 1989;Yan et al., 2014), as well as optimal bundling strategies in different competitive situations; i.e. perfect and imperfect competition (Adams and Yellen, 1976;Vamosiu, 2018). The incentive to bundle when consumers' valuation are non-additive (Armstrong, 2013), the implications of bundling on marketing (Stremersch and Tellis, 2002) and bundling as an instrument to deter competitors from entering a market (Eppen et al., 1991) have also been investigated. ...
Thesis
Technological innovations in recent decades have led to a further decrease in transport costs. As a result, global passenger transport, which is a primary enabler of increased globalisation, is at an all-time high. This has led to interconnectedness of states, organisations and people on a scale never seen before. While this development has many positive sides, such as increased overall prosperity, the transportation sector is also a significant source of greenhouse gas emissions and thus a primary driver of climate change. In parallel, digital transformation is leaving its mark on the transport sector. It is a principal driver of future transport directions, including automated driving, passenger drones and the autonomous delivery of goods. More subtly, today's transport system is already being transformed. New business models that rely on tight digital integration of services have started to appear and new mobility services such as ride sourcing, (e-)bike sharing and e-scooter sharing have been introduced in many cities around the world. Specifically, two developments connected to digital transformation have driven the emergence of new mobility services and have increased analysts' ability to study the transportation system. First, as a consequence of the high market penetration of smartphones, there is a direct interface between most individuals and mobility providers. This allows for the comprehensive personalisation of services: the location of the customer, information about capacities of transport networks and complementary information (such as weather data) can be taken into account when a service is offered. Second, the cost and effort required to obtain data on individuals, including their location, has decreased, enabling this information to be used to inform the design of transport policies. This thesis presents three contributions that are to a great extent driven by the global trends of digital transformation and subsequent personalisation. Two contributions are part of the broad topic of new mobility services, which are likely to shape future (urban) transport systems: Mobility as a Service (MaaS) bundles and electric bicycle-sharing systems. A wide array of shared and highly integrated services may contribute to a decrease in emissions and have the potential to ease the tension between increasing mobility and mitigating the environmental burden of the transport system. The third contribution assumes a more global perspective and examines one of the primary determinants of daily commuting patterns: choice of residential location relative to an individual's work location. A personal network survey was conducted to study the effects of proximity to personal contacts on residential location choice and its connection to commuting. The first contribution of the thesis shows that MaaS bundles may indeed be an attractive option for a certain share of the population. However, the results also suggest that not all services are viewed as complementary by potential customers. Including non-complementary services may decrease the propensity of customers to choose a particular bundle. Operators should thus carefully target bundles to potential customers. The second contribution analyses free-floating e-bike sharing. Free-floating (e-)bike-sharing services are often part of MaaS bundles and provide the flexibility that traditional public transportation sometimes lacks. This chapter shows that free-floating e-bike sharing is part of an ongoing evolution of bicycle-sharing systems. The competitive position of e-bike sharing compared to traditional modes of urban transportation is also examined. Drivers of e-bike-sharing demand are analyzed and it is shown that population, workplace density and proximity to central locations are among the most important drivers of demand. Transferability of the models to new areas is also analysed and discussed. The question of how personal networks affect residential location choice is answered using data from a personal network survey that was collected as part of this thesis. It is shown that personal networks are an important factor and ignoring them may lead to an overestimation of commute time in analyses of residential location choice. Partial compensation of longer commutes may be achieved through higher access to individual social capital that is provided by proximity to personal contacts. This potentially affects transport policies aimed at reducing time spent commuting.
... Sheikhzadeh and Elahi (2013) studied the relationship between product heterogeneity, retailer's risk aversion, and the selection of bundling sales strategies. Yan et al. (2014) found that retailers can achieve higher profit margins when implementing bundled sales and advertising promotions for complementary products. ...
Article
Full-text available
Sales strategies have a great impact on changes in supply and demand and a suitable sales strategy can reduce marketing costs and increase consumer purchasing preferences. Concerning the sales problems of imperfect complementary products in the two-stage supply chain consisting of two manufacturers and one retailer, by introducing the concept of complementarity elasticity, we measure the degree of complementarity and analyze the relationship between product complementarity and consumer purchasing preference, and we construct a supply chain coordination mechanism.
... E-commerce companies have used various techniques that have been highly successful in more traditional retail stores such as bundling products that are frequently bought together and providing an additional discount for buying bundles rather than individual products. Numerous studies [11,16,28] have pointed out the benefits of bundling products. It increases the average order revenue for retail shops while also providing a sense of satisfaction for buyers. ...
Conference Paper
Full-text available
Bundling is a technique e-commerce companies have adopted from traditional retail stores to increase the average order size. It has been observed that bargaining helps increase customer satisfaction while increasing the average order revenue for retailers. We propose a mathematical framework to incorporate bargaining capabilities with the product bundles provided by e-commerce web-sites. Our method creates a virtual agent that uses the modular Bidding-Opponent-Acceptance model for its bargaining strategy and the Thomas-Kilmann conflict mode instrument to model buyer behavior. We incorporate bargaining capabilities with bundles in an e-commerce system by using a negotiation agent that uses business logic for better strategy. It uses real-time data generated during a negotiation session, since the buyer behavior during a negotiation is crucial. No requirement exists for data from past negotiation sessions of the buyer, which removes bias as well as allowing for rapid changes to buyer behavior. The agent behavior can be altered by various hyperparameters. Our model provides utility metrics to measure buyer and agent satisfaction. Our results show that the agent successfully negotiates with humans from diverse backgrounds .
... Product pricing and sales strategies directly affect market product demand, which in turn affects the overall supply chain revenue. In the pricing strategy, the market power structure in the supply chain, the consumer channel loyalty and the complementarity of complementary products (Zhao et al., 2017), marketing costs (Yan et al., 2014) will affect the pricing strategy and the maximum profit of the supporting products. Wei et al. (2015) studied the price and optimal warranty of two complementary products in a two-stage supply chain consisting of two manufacturers and a common retailer. ...
Article
Full-text available
Purpose This paper attempts to analyze the relationship between the complementarity degrees of imperfect complementary products and sales strategies and give appropriate sales strategies for a two-stage supply chain. Design/methodology/approach With respect to two-stage supply chain consisting of two manufacturers who produce imperfect complementary products and one retailer who sells the products, aiming at bundling sales strategy, the authors define complementarity elasticity of products and use it to measure the degree of complementary between two products. Based on Stackelberg game and cooperation, the authors analyze the relationship between the complementarity degrees of imperfect complementary products and appropriate sales strategies. Findings As the impact of complementarity degree on sales strategy decision-making is better, the authors can pinpoint out which sales decision-making is optimal and which bundling sales strategy is the best for a two-stage supply chain. Considering that the degree of complementarity has a significant impact on the product sales strategy, the authors can point out which sales decision-making is optimal, that is, which bundled sales strategy is the optimal in the secondary supply chain of selling complementary products. Practical implications An innovative bundling can expand the sales of existing products and new products. It helps a retailer transcend and defeat competitors by reducing marketing expenses while increasing profits. Proper use of bundling can improve consumers utility and create an overall positive effect for both the enterprises and consumer. Originality/value The research can help some retailers to make many appropriate bundling sales strategies.
... However, these studies have only examined the operational efficiency of retailers, without considering the impact of upstream wholesalers on game results. Yan et al. [38] examine the relationship between bundle sale decisions and advertising. They analyze three scenarios: bundled with advertising, bundled without advertising, and not bundled. ...
... Packaging is a common strategy of firms when goods present some degree of complementarity (e.g. Yan and Bandyopadhyay, 2011;Yan et al., 2014;Jeitschko et al., 2017). This is the case of the typical goods and services that make up the tourism shopping basket. ...
Article
Airfare subsidies for residents in remote tourism destinations can negatively affect the local tourism industry. In this paper, we study the effects of airfare subsidies on a remote region's tourism sector with a theoretical model of air transport and tourism service transactions involving a remote tourism region, the rest of the country and the rest of the world. We show that firms' widespread packaging strategies in tourism markets, i.e. selling tourism packages composed of air transport and tourism services at a single price, acts as hidden price discrimination, since the packages are cheaper than buying the services separately. Thus, in the presence of higher airfares due to a subsidy, the tourists not entitled to the subsidy have incentives to switch to a cheaper alternative, namely tourism packages. Consequently, a packaging strategy can lessen or even avoid the negative impacts of the subsidy on a region's tourism sector.
... Palfrey, 1983) and advertising (e.g. Yan et al., 2014). In addition, since most markets operate under some degree of competition, the absence of interfirm competition (e.g. ...
Article
Full-text available
This paper studies optimal pricing when a monopolist firm produces two complementary goods and may undertake a bundling strategy. To do so, a modified version of Yan and Bandyopadhyay’s (2011) framework is used, in which the efficacy of the bundling strategy depends positively on the degree of complementarity of goods. Two main results are obtained. First, mixed bundling turns out to be the optimal strategy for the firm, since it yields higher profits than pure unbundling and pure bundling. Second, sales and profits from the bundling (unbundling) strategy increase (decrease) as the products become more complementary, which entails an empirically sensible behavior.
... Previous research also provides accurate and concise terminology for different types of product and service bundles. Investigated topics have included the role of complementarity and substitutability of the bundled services (McAfee et al., 1989;Yan et al., 2014), as well as optimal bundling strategies in different competitive situations; i.e. perfect and imperfect competition (Adams and Yellen, 1976;Vamosiu, 2018). The incentive to bundle when consumers' valuation are non-additive (Armstrong, 2013), the implications of bundling on marketing (Stremersch and Tellis, 2002) and bundling as an instrument to deter competitors from entering a market (Eppen et al., 1991) have also been investigated. ...
Article
Novel approaches to service bundling in the passenger transportation market are enabled by technology driven innovations and give rise to so called Mobility as a Service (MaaS) concepts. These approaches promise to increase the accessibility of existing public transportation services, possibly decrease car ownership rates and lower the environmental burden of the transportation system. However, the potential effects of comprehensive service bundles in the passenger transportation market are still largely unclear. In a competitive market, the potential success of MaaS bundles follows consumer valuation of the bundles as compared to valuation of stand-alone services. Thus, the difference between the bundle and sum-of-parts willingness to pay (WTP) is an indicator for the valuation of the bundling itself (which includes service integration valuation) and effects the competitiveness of the service bundles. In this study, several discrete choice experiments were conducted to indirectly estimate consumers' WTP for stand-alone transportation services and service bundles. The results indicate that public transportation, car sharing, and park and ride services are valuated significantly higher when offered in a bundle instead of as a stand-alone service. Bicycle-sharing, electrical bicycle (e-bike) sharing and taxi services are valuated lower. Potential consumers also exhibit a high WTP for a smartphone application that integrates the services and manages ticketing and payment. Consequently, subscription-based pure bundles for all transportation modes may not be the optimal strategy for mobility providers. Instead, it may be better to bundle public transportation with car sharing and park and ride to exploit the higher WTP and offer (electric) bicycle-sharing and taxi services on a pay-per-use basis. In this way, profitability of a public transportation system could be increased.
... Yan and Bandyopadhyay [16] center on the benefit of the bundling pricing. They also analyze the influence of advertisement on the pricing model [17]. Danaher et al. [18] study the bundling of digital songs and albums with a structural model and data experiment in order to determine own-and crossprice elasticities for songs and albums. ...
Article
Full-text available
In this paper, we study the pricing decisions stability when a retailer adopts bundling strategy for complementary products. We firstly explore whether or not the decision maker will adopt bundling strategy, finding that bundling strategy benefits retailer’s profit by improving sales of both products. Considering demand uncertainty, we focus on a bounded rational decision maker adjusting decisions in each period, build a dynamic pricing system and study its stability based on chaos theory. According to different pricing strategies for the bundling products, we propose two game models, i.e., simultaneous and sequential game, and compare the performance on the bundling strategy and system stability. The results show that both game models can reach the same optimal decisions, but sequential game has a better performance in keeping system stable. We also show the joint influence of parameters on the system stability and find that the retailer can control a chaos system caused by uncertain demand by slowing down the speed of decision adjustment. This paper’s theoretic contribution is to compare the performance of two or more systems’ stabilities based on Jury criteria.
... Ferrer et al. (2010) used dynamic programming methodology to analyse the previous mentioned scenario. Yan et al. (2014) studied the impact of advertising and product complementarity on the successful bundling of products. They show that when the degree of complementarity of two products increases the degree of advertisement needed to promote the bundled products decreases. ...
... Our work contributes to the bundling literature on competition and complementarity because we examine a firm's bundling strategy when the information product and the premium service exhibit complementary effects in the duopoly setting. A great number of studies focus on the bundling strategy of complementary goods (Bakos and Brynjolfsson 1999;Halmenschlager and Mantovani 2017;Mukhopadhyay, Yue, and Zhu 2011;Yan et al. 2014;Yue, Mukhopadhyay, and Zhu 2006). Recently, Taleizadeh et al. (2017) examine the optimal problem for two complementary goods under three business strategies (i.e. ...
Article
Full-text available
In this paper, we model a fully covered duopoly market in which two firms offer a differentiated information product that exhibits positive network effects and a complementary premium service to consumers. For each firm, there are two marketing strategies: the freemium strategy and the bundling strategy. We find that, under the market equilibrium, a firms’ decision whether to employ the freemium strategy or not depends largely on the quality of the information product compared to its rival. When the information product quality is similar and the products’ intrinsic values are sufficiently large, both firms will be better off by adopting the freemium strategy, while the bundling strategy will prevail if the products’ intrinsic values are sufficiently small. Additionally, when the magnitude of complementary effects or network effects exceeds a given threshold, both firms’ profit can be enhanced by an increase in the degree of product complementarity or in the intensity of network effects. We also demonstrate that a firm can benefit from an increasing market size only if the intrinsic value of its information product is sufficiently large. Finally, we extend our model to the uncovered market and derive the equilibrium prices and profits.
... Yan and Bandyopadhyay (2011) investigated the bundling of complementary products and showed that firm can benefit from the complementary bundling conditionally. Yan et al. (2014) further investigated the strategic influence of product complementarity and advertising on the success of bundling products and showed that when a firm sells bundled products, both the product complementarity and advertising significantly impact the performance of bundled products. Brito and Vasconcelos (2015) investigated the competitive effects of bundled discounts offered by pairs of independent firms in setting with vertically differentiated goods and showed that in equilibrium, all pairs of firms producing goods of the same quality level offer bundled discounts relative to goods without bundling. ...
Article
Full-text available
In this paper, we consider a duopoly market where two manufacturers separately produce and sell two complementary products through a common retailer as a leader–follower movement. The competition has been studied in two-echelon supply chain system and all produced products are sold by the retailer with individual product prices or with pure products’ bundling price in the non-cooperative market. The demand of each product linearly depends on prices of these two products as per their nature. Here, model for two different cases (without and with pure products’ bundling) are developed mathematically to maximize the profit of each participant of the supply chain and then corresponding optimal pricing strategies are worked out for the manufacturers and retailer. It is shown that supply chain profit for the pure bundling is better than the profit when products are sold at individual prices. Finally, the model is illustrated with numerical data to study the effects of models’ parameters in the pricing strategies and some marketing decisions are explored.
... Girju et al. (2013) considered a marketing channel including a manufacturer and a retailer to examine bundling decisions of channel members in which Stackelberg games are established between the partners. Yan et al. (2014) investigated the strategic influence of product complementarity and advertising on the success of bundling products. They considered the profit function and showed that when the firm sells bundled products, both the product complementarity and advertising impact the performance of bundled products, noticeably. ...
Article
Full-text available
Selling correlated products faces the sellers with the cross-selling, which is a key factor in managing revenue and costs of the sellers. Cross-selling is a phenomenon which happens when the demands of products are correlated so that the demand for one of the correlated products automatically initiates demand of another. In these cases, different selling tactics such as bundling, tying, mixed bundling, etc. are applied to sell the items. In this paper, an integrated pricing-inventory model for two complementary products under three selling strategies is developed. In the first model, it is assumed that the seller sells the products separately while those are packed and sold as bundling in the second model. The third model is extended in presence of a mixed-bundle strategy so that the products are presented as both bundling and single. The aim is to determine the optimal values of selling prices, bundle prices and order quantities of products along with the optimal period length so as the total profit is maximized. Moreover, optimal solutions are derived, solution algorithms are proposed, and at the end, numerical illustrations and also some sensitivity analyses are presented.
... Yan and Bandyopadhyay [21] investigated the bundling of complementary products and showed that a firm can benefit from complementary bundling conditionally. Yan et al. [22] further investigated the strategic influence of product complementarity and advertising on the success of bundling products, and showed that when a firm sells bundled products, both the product complementarity and advertising have significantly impact the performance of bundled products. Yue et al. [23] showed that it is beneficial to share information in a Bertrand game, whereas Mukhopadhyay et al. [15] demonstrated that, in a Stackelberg game, information sharing could benefit the leader, but hurt the follower as well as the total profit. ...
Article
Full-text available
In this paper, a competition of selling two substitutable products and one complementary product has been studied in two-echelon supply chain systems in which one of these three products is produced by one manufacturer separately, and all produced items are sold through a common retailer in the market. The demand of each product depends linearly on prices of these three products as per their nature. In this study, four different decision scenarios are developed mathematically under the game theory framework to maximize the profit function of each participant of the supply chain, and a number of pricing strategies are subsequently worked out for manufacturers and retailer. Finally, the model under different scenarios is illustrated with numerical data to study the feasibility of the model exploring the managerial insights, as well. Different marketing policies are predicted for maximum individual and system profits.
... [3] Developed a profit-maximization model to provide a framework that can help firms optimizing bundling product categories and pricing strategies. [4] Investigated the strategic influence of product complementarity and advertising on the success of bundling products. When the most literatures focus on the bundling strategy of centralized firms, a few recent researches study bundling strategy in decentralized channel. ...
Conference Paper
We investigate product bundling strategy in a distribution channel with a common retailer and two complementary products suppliers. We get the thresholds of bundling effect for bundling strategy in different channel structures, and show that the cooperation of suppliers and retailer will improve the profitability of bundling strategy in some cases. The complementary suppliers cooperate to form an alliance only when the bundling effect is high enough, and the grand alliance could be stable when the allocation of bargaining power between channel members is appropriate. The bundle area will be expanded by the cooperation of retailer and by the cooperation of two suppliers when the degree of product complementarity is high enough.
... Another related paper is [8]. They considered an assemble-to-order system including multi-suppliers supplying symmetrically complementary components and a common assembler producing substitute products. ...
Conference Paper
This paper considers a decentralized asymmetrically Complementary Product Supply Chain consisting of two complementary suppliers and two competitive retailers. We will analyze the pricing game between the supply chain players and study the effects of pricing behavior on system's performance. We also provide a number of numerical examples to demonstrate some important managerial insights.
... Bundling rewards in crowdfunding strongly resembles product bundling or the act of offering several products for sale as one combined product. This marketing strategy has been found to be most successful if there are economies of scale in production and marginal costs of bundling are low [32][33][34] . Bundling is therefore a good strategy if the initiator's additional marginal cost of topping up a reward bundle is low and if they have actual additional benefits, as would be the case for recognition, readily and easily available. ...
Article
In crowdfunding, rewards can make or break success. Yet reward design, choice, and planning still occur based on availability rather than strategy. To address this challenge, this article provides an empirically derived crowdfunding reward toolbox offering guidance in strategically selecting rewards. Based on a large-scale analysis of successful and unsuccessful Kickstarter projects, this article classifies rewards that are currently offered along eight dimensions. It identifies emerging patterns and derives five strategic core tools and two add-on tools. Finally, it delivers exploratory insights into the relative effectiveness of different tools that can facilitate decision making and strategic planning for entrepreneurs and individuals who plan to launch a crowdfunding project and who seek ways to reward their supporters. This is where the publisher says you should go to get the full text: For educators who are looking for a complimentary review copy: Harvard for Educators OR Study.Net For non-educators: Harvard Business Review OR Study.Net OR University Readers
In order to enhance both purchase willingness and consumer satisfaction, firms may sell products in a customized bundling way, with which consumers are allowed to select their preferred products to form a bundle. However, such a way needs to be carried out with an efficient strategic tool. This study contributes to the literature by proposing a two-stage customized bundling strategy with the aims of maximizing the firm's profit and satisfying the consumers' demands. The proposed strategy may assist managers in enhancing consumer satisfaction and loyalty under consideration of consumer heterogeneity. Consumers can select one main product with the greatest utility from the main product category at the first stage, and then, at the second, consider the associations between the chosen main and possible add-on products in the add-on product category, and finally select an add-on product to form a customized bundle with the greatest overall utility. Pricing strategies are investigated and compared for the customized and other traditional bundling strategies. The results show that when consumers are highly sensitive in their preferences, the use of a customized bundling strategy would be more profitable. However, in an extreme case when the consumer's perceived value of the add-on product and product association are both high, the traditional individual sales strategy would earn more profits than the customized bundling strategy.
Chapter
With the emergence of new kinds of markets, there have also appeared nontraditional players in the marketplace. These new kinds of markets and players have created unparalleled challenges to the world of learning and business decision-making, while scholars recognized that Porter’s (1985, Competitive Advantage: Creating and Sustaining Superior Performance. New York, NY: Free Press) value-chain framework is no longer sufficient for analyzing business firms. To meet these challenges, this chapter, which is partially based on Forrest et al. (2020, Advances in Systems Science and Applications, 20(3), 50–72) and Forrest et al. (2020, Journal of Business and Economic Studies), continues the previous chapter by exploring potentials of value capture at the firm level from several diverse angles—interorganizational network, close association between sellers and buyers, and then generalizes Porter’s value-chain framework that is equally applicable to the analysis of firms that offer tangible products, services, or informational goods. Accordingly, practical and reliable general recommendations, as well as a few unsettled questions for future research, are offered.
Article
Purpose The present research aims to identify critical antecedents of willingness to pay (WTP) for traditional bundles (those comprising only goods or services) in an emerging market context. Further, it differentiates the relative importance of the determinants of customers' WTP according to the bundle type. Design/methodology/approach Data were collected from Indian customers. The paper uses conjoint analysis with an orthogonal design. The experimental conditions were manipulated using vignettes. Findings The results indicated that purchase autonomy was considered the most important driver for customer's WTP in the case of traditional bundles. Quality variability, overall bundle quality and complementarity followed autonomy in the order of importance. Moreover, the interaction effects of autonomy and complementarity with bundle type significantly influenced the customer's WTP. Customers had a higher WTP for services bundle in high autonomy and goods bundle in high complementarity situations. Practical implications Retailers should allow customers to buy either the entire bundle or its components separately, irrespective of the type of traditional bundle. They should try to make bundles whose perceived quality varies significantly in the target customers. Retailers should try to keep complementary components in the goods-only bundle. Originality/value The present study extends the relationship of the WTP with its antecedents to traditional bundles. Earlier studies have only studied these relationships for hybrid (combination of goods and services) bundles. With the current study results, retailers can bundle traditional bundles (goods only and services only).
Article
Full-text available
Penelitian ini bertujuan untuk menganalisis pengaruh antara dynamic pricing dan dynamic bundling terhadap persepsi ketidakadilan harga yang akhirnya menentukan tingkat kepuasan umum dalam membeli sebuah produk/jasa. Sebesar 340 responden dijadikan sebagai sampel setelah melalui proses penyaringan. Hasil analisis menemukan bahwa harga dinamis berpengaruh signifikan terhadap persepsi ketidakadilan harga. Kedua dynamic bundling berpengarauh tidak signifikan terhadap persepsi ketidakadilan harga. Ketiga persepsi ketidakadilan harga yang disebabkan oleh dynamic pricing berpengaruh tidak signifikan terhadap kepuasan. Terakhir persepsi ketidakadilan harga yang disebabkan oleh dynamic bundling berpengaruh signifikan terhadap kepuasann.
Article
Full-text available
This study aims to analyze the effect of responsiveness and switching costs on customer retention. A total of seventy respondents were selected in this study, they are graduate students (master degree) for the Department of Management of the Universitas Pendidikan Indonesia (UPI) who used SIMPATI cellular cards on their cell phones. The purposive sampling was a sampling technique for this study. The method of analysis in this study used multiple linear regression analysis with the support of the SPSS tool. The results showed that simultaneously the responsiveness and switching cost variables had an influence on the customer retention variable. Partially, the responsiveness variable has an influence on the customer retention variable, while not the switching cost variable. The coefficient of determination is 0.146, which means that customer retention in this study is explained by only 14.6% by responsiveness and switching costs. Several recommendations are stated in this article for the perfection of further research.
Conference Paper
Presently, many online sellers prefer to use pricing strategies for selling a large number of products. The central idea of these strategies is to encourage buyers to buy in greater quantities. Vendors often charge a buyer high prices if they buy products separately, but they might offer a bundle or a set of mixed products for a discounted price. As we can see in today's markets, this method attracts the most price-conscious of buyers to purchase more goods than they are expected at the first time. Buyers can be trapped easily, and they either have to choose individual items or limiting their options. In order to cope with this vendor strategy, buyers have consolidated the individual demand to receive the best possible price. In this paper, the heuristic algorithm, called genetic algorithm, is employed to search for the optimized solution for a group of buyers in terms of the profit for the group of buyers. Hence, the proposed algorithm was implemented as a web-based application forming an optimized group of buyers to demonstrate how it could employ in the real world.
Firms in the consumer electronics industry frequently launch new styles of their products, which leads to a “two-period” phenomenon in their product sales. Only a few published articles have considered two-period models in cooperative advertising. This paper investigates co-op advertising strategies in a two-period supply chain consisting of a single manufacturer and a single retailer. Utilizing game theory, we consider two different scenarios: a decentralized scenario with a cooperative advertising program and an integrated scenario. Aside from these scenarios, we propose a supply chain contract to coordinate this supply chain system. This paper has the following conclusions: (i) the manufacturer usually does not provide the same advertising subsidy strategy for the two generation products in the same period; (ii) the manufacturer may provide a low subsidy rate to the retailer if the advertising long-term effect is strong; and (iii) we demonstrate that the two-way subsidy contract can achieve a perfect supply chain coordination if a transfer payment exists.
Book
Full-text available
Przeciętnemu użytkownikowi Internet jawi się jako źródło nieprzebranych informacji, licznych udogodnień i aplikacji oraz ogromnych zasobów treści rozrywkowych. Co dzień miliardy ludzi korzysta z dobrodziejstw Internetu, nie zastanawiając się nad tym, że większość z jego zasobów, dostarczanych jako produkty wirtualne, jest nieodpłatna. Wartościowe produkty wirtualne są dostarczane przy cenach zerowych, co stoi w sprzeczności z zasadą gospodarowania. Z ekonomicznego punktu widzenia jest to paradoks. Niniejsza książka jest próbą jego wyjaśnienia na kanwie trzech programów badawczych: ekonomii neoklasycznej, ekonomii kosztów transakcyjnych i teorii wymiany społecznej. Prowadzone tu rozważania mają zarówno charakter praktyczny, ukazując strategie biznesowe przedsiębiorców udostępniających nieodpłatnie produkty wirtualne, jak i teoretyczny, dotyczący możliwości eksplanacyjnych poszczególnych programów badawczych.
Article
Full-text available
We investigate the bundling strategy in a two-stage supply chain with the channel competition and analyze the effects of bundling strategy on supply chain decisions and performance. In this paper, we consider two kinds of channel competition, which are from outside the supply chain and inside the supply chain, and also consider two kinds of competitor’s product strategy with low or high quality. We proposed the game models for the different competition cases with bundling strategy and product quality strategy and obtain the optimal decisions. We find that the bundling is the leading retailer’s preferred strategy with the condition of the quality level of competitive components when she faces the channel competition outside the supply chain; and the retailer’s bundling profitability depends on the competitor’s products strategy in the supply chain setting with the inside competition. We also find that the profit of members and channel of supply chain will be improved under bundling strategy.
Article
Purpose This paper aims to address the following problems: What are the firms’ optimal pricing and quality policies under three scenarios (no bundling, pure bundling and mixed bundling)? In what condition will one bundling strategy dominate the others? How does the degree of complementarity affect the firms’ decision? Design/methodology/approach Using the game theory, this study first establishes three models of bundling strategies: no bundling, pure bundling and mixed bundling and then obtains the optimal prices and quality decisions. This study uses numerical analysis to explore the relationships between the prices (demands and profits) and some key parameters and to obtain some valuable management complications. Findings Some interesting and valuable management implications are established: regardless of the degree of complementarity, adopting a pure bundling or mixed bundling strategy is better than separately selling an individual product; a high degree of complementarity leads to reduced profit in the no bundling and mixed bundling scenarios, whereas the condition in the pure bundling strategy is the opposite; and when the degree of complementarity is adequately large, choosing pure bundling strategy is more profitable. Research limitations/implications On the one hand, this study does not calculate the profit sharing ratio, and hence, the equilibrium profit sharing ratio can be explored in future work. On the other hand, marketing efforts (e.g. advertising and promotion) can be included in the study. Practical implications This study derives the necessary conditions for the most effective bundling strategy that maximizes firm’s profits, and these conclusions can provide a decision reference to the bundling decisions of firms. Originality/value First, the optimal bundling strategies in a horizontal supply chain consisting of two firms is considered. Under the pure and mixed bundling strategies, the two firms sell the bundled product by building a cooperative program. Second, both the pricing policies and quality decisions of supply chain members under the different bundling strategies are studied.
With the increased availability of consumer-specific data and the ease of changing prices, firms more frequently use dynamic pricing where products are priced at an individual level based on individual consumer information. Dynamic pricing can effectively extract consumer surplus and increase firm profitability. However, it also arouses consumer unfairness perceptions. Three studies demonstrate that the use of bundling in combination with dynamic pricing (dynamic bundling) can reduce consumer unfairness perceptions. The negative effects of dynamic pricing are mitigated by bundling. A bundle enhances perceived transaction dissimilarity thereby reducing consumers’ comparison intentions leading to greater price fairness perceptions.
Article
In this paper, we consider a supply chain consisting of two manufacturers and one retailer producing and retailing complementary products facing stochastic demand. We focus on the retailer's bundling strategy and investigate the impact of the stochastic demand and manufacturers’ decisions on the bundling strategy. We find that the manufacturers will make cooperative game to maximize their profits. With manufacturers’ cooperative pricing strategy, the retailer will adopt bundling strategy facing a low level uncertain demand. Under severe uncertainty, the retailer will adopt no-bundling strategy to obtain more profits. We work out the critical condition which determines the retailer's retail strategy. We also analyze the stability of the dynamic game system in which the retailer adopts bundling and no-bundling strategy and find that the system in which the retailer adopts no-bundling strategy has a better performance on keeping stability, although the market is more uncertain. Finally, we provide managerial insights for the manufacturers to keep system stable and control the unstable system.
Article
Full-text available
In this paper, we investigate the price decisions for a seller who provides two complementary products to strategic consumers over two periods under three selling strategies: markdown pricing, second period bundling (SPB) and first period bundling (FPB). We find that the seller’s optimal prices in the second period of SPB and FPB are higher than that of markdown pricing strategy, the seller can obtain the best profit by utilizing the FPB strategy, and obtain more profit in the SPB strategy than that in the markdown pricing strategy with some conditions. The effects of consumers’ patience and complementary coefficient of products on seller’s profit and selling strategies are analyzed by the numeral examples.
Bundling in retail has been argued to improve sales volume and speed, which can improve retailers’ operation performance. However, recent research finds that the purchase quantity requirement in traditional bundling deters non-buyers from becoming buyers. This paper proposes “social bundling,” as a novel method that alleviates the quantity requirement while satisfying the bundling benefits for consumers and retailers. We empirically test a theoretical model that explains the advantages and disadvantages of social bundling vis-à-vis traditional bundling in influencing consumers’ intentions to purchase in bundles. We conclude that social bundling outperforms traditional bundling in driving intention to purchase in bundles.
Article
Full-text available
The paper presents the results of a study aimed at identifying the nature of relations between the sources of information for innovation and R&D expenditures and investment in new fixed assets in MHT and HT industry in Poland. It is assumed that the importance of sources of information for innovation is proportional to the number and scope of innovation activity involved. The scope of the survey relates to innovation in both MHT & HT industry. It is characterized by innovation at the firm level and takes into account the diffusion to the "new for the company". Innovation activity includes (1) expenditure on research and development and (2) investments in fixed assets not used so far such as: a) buildings, premises and land; b)machinery and equipment, c) computer software. Sources of information for innovation include: customers, internal sources, suppliers, conferences, fairs, exhibitions, competitors, journals, trade magazines, scientific societies, foreign and domestic R&D units, universities, Polish Academy of Sciences units. The survey covers 1355 both MHT & HT industry companies. The methodological part of the analysis is based on a probit modeling, which allows to determine the probability of innovative behaviors depending on the source of information for innovation. The highest number of dependencies concerns customers (57,56%), internal sources (40,66%) and conferences, fairs and exhibitions (40,30%). The lowest number of linkages concerns Polish Academy Units (3,76%) and national R&D units (3,47%). The most significant information originate from universities (5 positive models), competition (4 positive models) and conferences, fairs and exhibitions (4 positive models). There are no significant models for customers what suggests that there is a technological gap between Poland and developer economies.
Article
Full-text available
In an attempt to provide a framework that can help firms find optimum bundling product categories and pricing strategies that maximize their profits, this study develops a profit-maximization model. The results indicate that optimum bundles and price strategies exist; specifically, if a firm uses a bundling strategy to sell its products, it should combine highly complementary products and charge a relatively lower price. The value of a bundling strategy always increases with the size of market and price sensitivity. Managers can use the provided model framework and related advice and examples to plan their bundling strategies.
Article
Full-text available
Bundling is pervasive in today's markets. However, the bundling literature contains inconsistencies in the use of terms and ambiguity about basic principles underlying the phenomenon. The literature also lacks an encompassing classification of the various strategies, clear rules to evaluate the legality of each strategy, and a unifying tramework to indicate when each is optimal. Based on a review of the marketing, economics, and law literature, this article develops a new synthesis of the field of bundling, which provides three important benetits. First, the article clearly and consistently defines bundling terms and identifies two key dimensions that enable a comprehensive classitícation of bundling strategies. Second, it formulates clear rules for evaluating the legality of each of these strategies. Third, it proposes a framework of 12 propositions that suggest which bundling strategy is optimal in various contexts. The synthesis provides managers with a framework with which to understand and choose bundling strategies. It also provides researchers with promising avenues for further research.
Article
Full-text available
We develop an analytical model of contingent valuations and address two questions of import to a monopolist: (i) should a given pair of complements or substitutes be sold separately (pure components), together (pure bundling), or both (mixed bundling), and at what prices? (ii) How do optimal bundling and pricing strategies for complements and substitutes differ from those for independently valued products? We find that the combination of marginal cost levels and the degree of complementarity or substitutability determines which of the three bundling strategies is optimal. Complements and substitutes should typically be priced higher than independently valued products.
Article
Complementary bundling is a selling strategy whereby two or more products which are functionally related are sold at one combined price. Using a survey of prices, the findings indicate that while on average consumers save about 8% by purchasing bundles, in contrast to popular belief, they may at times pay significantly higher prices by purchasing the bundle, rather than buying the bundle items individually. Consumer savings in complementary bundles range from 57% to −18%, and may be affected by bundle characteristics such as the number of items in the bundle and the level of variation in the value of bundle items. The findings also indicate a significant amount of variation in savings, both within, and between categories.
Article
Although bundling, the selling of two or more products and/or services at a single price, has a history of economic research, marketing-oriented investigations have appeared only recently. This paper examines buyers' perceptions of overall savings when they evaluate a bundle offer. Such perceptions of overall bundle savings may consist of two separate perceptions of savings, each with a different relative influence: (1) perceived savings on the individual items if purchased separately and (2) perceived additional savings on the bundle. Results of an experiment indicate that additional savings offered directly on the bundle have a greater relative impact on buyers' perceptions of transaction value than savings offered on the bundle's individual items. The effect of each saving is also influenced by the magnitude of the other saving.
Article
As product lines have broadened in many industries (particularly service industries), the use of mixed price bundling has increased. In mixed price bundling, a firm offers its customers the choice of buying one or more products/services individually or of buying a "bundle" of two or more products or services at a special discount. The author presents a normative framework for selecting appropriate types of services for different mixed-bundling discount forms. The framework extends the economic theory of bundling (which historically has been applied to tie-in sales) to permit explicit consideration of different types of complementarity relationships and strategic marketing objectives.
Article
The authors propose a probabilistic approach to optimally price a bundle of products or services that maximizes seller's profits. Their focus is on situations in which consumer decision making is on the basis of multiple criteria. For model development and empirical investigation they consider a season ticket bundle for a series of entertainment performances such as sports games and music/dance concerts. In this case, they assume consumer purchase decisions to be a function of two independent resource dimensions, namely, available time to attend performances and reservation price per performance. Using this information, the model suggests the optimal prices of the bundle and/or components (individual performances), and corresponding maximum profits under three alternative strategies: (a) pure components (each performance is priced and offered separately), (b) pure bundling (the performances are priced and offered only as a bundle), and (c) mixed bundling (both the bundle and the individual performances are priced and offered separately). They apply their model to price a planned series of music/dance performances. Results indicate that a mixed bundling strategy is more profitable than pure components or pure bundling strategies provided the relative prices of the bundle and components are carefully chosen. Limitations and possible extensions of the model are discussed.
Article
Of the Law of Demand 20. To lay the foundations of the theory of exchangeable values, we shall not accompany most speculative writers back to the cradle of the human race; we shall undertake to explain neither the origin of property nor that of exchange or division of labour. All this doubtless belongs to the history of mankind, but it has no influence on a theory which could only become applicable at a very advanced state of civilization, at a period when (to use the language of mathematicians) the influence of the initial conditions is entirely gone. We shall invoke but a single axiom, or, if you prefer, make but a single hypothesis, i.e. that each one seeks to derive the greatest possible value from his goods or his labour. But to deduce the rational consequences of this principle, we shall endeavour to establish better than has been the case the elements of the data which observation alone can furnish. Unfortunately, this fundamental point is one which theorists, almost with one accord, have presented to us, we will not say falsely, but in a manner which is really meaningless. It has been said almost unanimously that "the price of goods is in the inverse ratio of the quantity offered, and in the direct ratio of the quantity demanded." It has never been considered that the statistics necessary for accurate numerical estimation might be lacking, whether of the quantity offered or of the quantity demanded, and that this might prevent deducing from this principle general consequences capable of useful application. But wherein does the principle itself consist? Does it mean that in case a double quantity of any article is offered for sale, the price will fall one-half? Then it should be more simply expressed, and it should only be said that the price is in the inverse ratio of the quantity offered. But the principle thus made intelligible would be false; for, in general, that 100 units of an article have been sold at 20 francs is no reason that zoo units would sell at 10 francs in the same lapse of time and under the same circumstances. Sometimes less would be marketed; often much more.
Article
Purpose The purpose of this paper is to investigate the effectiveness of price bundling and message framing on attitudes, intentions, and beliefs about attributes of teeth whitening products. Although each of these variables, message framing and price bundling, has been explored individually, few attempts have been made to investigate them jointly. This study is based on a full factorial design that allows for testing of interaction effects. Second, the market for whitening products is maturing, resulting in a target market that is gaining knowledge about these products. Thus, we use knowledge as a covariate in the above investigation to determine if the communication strategy should be changed as the product moves from introduction to maturity. Design/methodology/approach The study is based on a 2 × 2 factorial design with price bundling (bundle price – individual price) and framing (positive – negative). The setting for the study is a hypothetical brand name of teeth whitening products. Findings The results reveal a mixed picture with respect to effectiveness of pricing and framing on attitudes and intentions. The effect of price bundling is not significant on attitudes; it is significant on intentions. Framing has a greater impact on intentions than on attitudes. Nevertheless, the interaction effects are significant on both attitudes as well as intentions. Finally, the impact of knowledge as a covariate is significant. Research limitations/implications Caution is advised in extrapolating the results beyond the issues investigated in the study. Practical implications The findings help marketers in formulating effective marketing strategy using both price bundling and message framing strategies. Originality/value Although price bundling and message framing have been explored in marketing studies, the research is lacking on the combined effects of these two important variables. The findings show a significant interaction effect of pricing and framing on changing attitudes and intentions. Prior research recommends using negative framing. The present research shows that for bundle products, a positive framing approach is desirable.
Article
Product bundling is an increasingly important marketing strategy within many industries, and consumer influence on companies' ranges of product bundles is, thus, becoming an important issue. The aim of this study was to investigate product bundling strategies consumers are exposed to by some selected companies in the Swedish automobile, travel and banking industries. Bundling strategies were considered in relation to business orientation as well as the consumer's potential to influence the product bundles offered by these companies. Fourteen qualitative telephone interviews were conducted with senior representatives from the three sectors. Interview respondents were selected in cooperation with their respective companies. Results underwent interpretative analysis, and the findings indicated that business orientation is linked to product bundling techniques and to the type of customer influence on product bundling. Consumers were exposed to mixed and complementary bundling strategies, and customers of companies that apply a market orientation were found to have greater opportunities to influence product bundles directly, whereas companies that apply a production-oriented approach were less able to respond to their customers' wishes. Consumer influence on the product bundles of production-oriented companies was found to be of a more indirect nature.
Article
Bundle pricing is a widespread phenomenon. However, despite its importance as a pricing tool, surprisingly little is known about how to find optimal bundle prices. Most discussions in the literature are restricted to only two components, and even in this case no algorithm is given for setting prices. Here we show that the single firm bundle pricing problem is naturally viewed as a disjunctive program which is formulated as a mixed integer linear program. Multiple components, and a variety of cost and reservation price conditions are investigated with this approach. Several new economic insights on the role and effectiveness of bundling are presented. An added benefit of the solution to the bundle pricing model is the selection of products which compose the firm's product line. Computational testing is done on problems with up to 21 components (over one million potential product bundles), and data collection issues are addressed.
Article
In this paper we analyze the joint implications of two effects: (a) inserting independent profit-maximizing retailers into the channel system provides “buffering” to the manufacturers from price competition when their products are highly substitutable and intrachannel contracts are observable (as shown by McGuire and Staelin 1983 under the assumption of constant marginal production costs), and, (b) lack of channel coordination results in a reduction in manufacturer's incentives to invest in efforts to reduce production costs (as shown by Jeuland and Shugan 1983 for the case of bilateral monopoly). We show that both these results are robust in the sense that the first holds even in the presence of the vertical externality of manufacturer's effort reduction in a noncoordinated channel, and the second holds regardless of the degree of substitutability between the competing channel's products. Specifically, we analyze a four-stage game with two manufacturers and two retailers, where the intrachannel contracts are linear and observable and manufacturers make investments in process improvements to reduce their production costs. We find that the optimal channel structure decision depends on interactions between two parameters: the degree of substitutability between products and the level of investments required to achieve production cost reduction. These parameters represent what have been widely interpreted in the management literature as the two primary “generic strategies” that most organizations follow in order to gain competitive advantage: cost leadership and product differentiation (Porter 1980). Thus, our analysis brings out the strategic and interdisciplinary nature of the channel structure decision that can significantly affect firm profitability. Our main results are as follows. First, we find that decentralized, noncoordinated channels appear as more profitable equilibrium than integration (or perfectly coordinated channels) at high product substitutability even when process innovation dimension is accounted for, in agreement with the literature. However, the range of substitutability over which decentralization is an equilibrium strategy is smaller the easier it is to reduce production costs. Intuitively, the easier the cost reduction, the larger the cost penalty that the channel incurs as a result of not coordinating investment and pricing decisions between channel members, and thus smaller the range over which decentralization is an equilibrium. This implies that there is an explicit tradeoff between efficiency and strategic incentives in distribution channel design. Second, we show that decentralized manufacturers invest less in process innovation than integrated manufacturers do, regardless of the structure of the competing channel and the degree of substitutability between products. Consequently, a decentralized channel has higher costs, charges higher prices, and produces lower quantities than an integrated channel does. Moreover, these differences get larger the easier the cost reduction. The effect on manufacturer profits, however, is not that clear. Manufacturers make higher profits by decentralizing if products are highly substitutable, in agreement with McGuire and Staelin (1983) and Coughlan and Wernerfelt (1989). However, we also find that the relative profitability of decentralization at high substitutability (and of integration at low substitutability) increases the easier the cost reduction. Moreover, the range of substitutability over which decentralization is more profitable than integration is itself larger the easier the cost reduction (though decentralization is an equilibrium strategy over a smaller range). Thus, process innovation accentuates the profit difference between integrated and decentralized channels and makes the Prisoner's Dilemma situation worse in the choice of distribution channel structure. Finally, we analyze two examples of coordinated decision making in a channel: a divisional integrated system and franchising. In the first case, we find that decentralization can emerge as a unique (and more profitable) equilibrium at high product substitutability, in contrast to McGuire and Staelin (1983). In the second case, we find that decentralization is not always a unique equilibrium and it is not always more profitable than integration, in sharp contrast to the results by Coughlan and Wernerfelt (1989). Thus, franchising does not provide a sure way of achieving channel coordination when marginal production costs are not constant. In sum, this paper highlights the importance of simultaneously considering both the horizontal and the vertical dimensions of interorganizational relations on one hand and, on the other, paying attention to cross-functional interactions across marketing and operational decisions to better understand the underlying incentives that shape firm and market structures; conventional focus of marketing on demand side effects and of operations on cost side effects can lead to suboptimal decisions.
Article
Cooperative advertising plays a strategically important role in marketing programs. In this paper, we use a game theoretical model to study not only cooperative advertising but also pricing strategy in a manufacturer—e-retailer supply chain with the consideration of product categories. First, two cooperative advertising models (the leader-follower Stackelberg and the strategic alliance) are established and analyzed. We then compare the two models to develop some important theories and managerial insights. Furthermore, we utilize a bargaining model to implement profit sharing and determine the manufacturer’s participation rate for cooperative advertising in the channel coordination of strategic alliance. Based on our results, we derive optimal market strategies and identify probable paths of future research. KeywordsE-marketing-Cooperative advertising-Product categories-Channel coordination-Pricing strategy-Marketing research
Article
In a duopoly model where firms have private information about an uncertain linear demand, it is shown that if the goods are substitutes (not) to share information is a dominant strategy for each firm in Bertrand (Cournot) competition. If the goods are complements the result is reversed. Furthermore the following welfare results are obtained: 1.(i) With substitutes in Cournot competition the market outcome is never optimal with respect to information sharing but it may be optimal in Bertrand competition if the products are good substitutes. With complements the market outcome is always optimal.2.(ii) Bertrand competition is more efficient than Cournot competition.3.(iii) The private value of information to the firms is always positive but the social value of information is positive in Cournot and negative in Bertrand competition.
Article
Offers guidelines for creating marketing bundles of products. Features of a bundle of products; Similarities of creating a bundle with creating a new product; Use of bundles in reducing costs and in market expansions; Use of bundles in improving product performance.
Article
It has long been a marketing axiom that customers buy bundles of satisfaction, not products. It follows, then, that they'll respond to certain combinations of products and services--air conditioners with free installation, combinations of software packages, or season tickets with parking privileges. The difficulty is in devising the bundles that both appeal to consumers and give cost or demand enhancing benefits to the producer. Eppen, Hanson, and Martin argue that the best approach is to treat bundles not as marketing gimmicks but as new products. They offer seven guidelines for creating competitive bundles and a framework for implementing them.
Article
Bundling, the joint offering of two or more items, is a common selling strategy, yet little research has been conducted on buyers' evaluation of bundle offers. We developed and tested a model of bundle evaluation in which the buyers anchored their evaluation on the item perceived as most important and then made adjustments on the basis of their evaluations of the remaining bundle items. The results of two computerized laboratory experiments suggested that people tend to examine bundle items in a decreasing order of perceived importance and make adjustments to form their overall evaluation of the bundle. Copyright 1994 by the University of Chicago.
Article
I. Introduction, 475.—II. The model: positive properties, 477.—III. The model: normative properties, 490.—IV. Implications and conclusion, 495.
A Note on Block Booking. The Organization of Industry
  • G L Stigler
Stigler, G.L., 1968. A Note on Block Booking. The Organization of Industry. Richard D Irwin, Inc., Nobleton, Ontario, pp. 165-170.