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The effects of regulatory focus and bundle-pricing framing on consumers' perceptions of loss.

One strategy used by firms to increase their sales and market share is bundle pricing; that is, to bundle together a variety of goods or services that are then priced and sold as a package (Guiltinan, 1987).

A review of previous studies about bundle pricing shows that there are differences in focus for sellers and buyers. In research on marketing it has been shown that, from the seller firm's point of view, the focus has been on the how to set the optimal bundle price (Guiltinan, 1987). Studies from the consumers' point of view have focused on examining the buyers' perceptions of savings, their evaluations of individual items, and preferences for the choices (Yadav & Monroe, 1993). However, there have been few studies in which the focus of the research has been on the relationship between regulatory focus and bundlepricing framing.

Higgins (1997) utilized regulatory focus theory to identify two distinct goal orientations: a promotion-focused system that gives weight to obtaining the maximum gains; and a prevention-focused system in which value is placed on reducing loss. In other words, a regulatory focus can lead to different perception of loss for bundled products.

According to regulatory focus theory, buyers may perceive loss when they encounter a bundled product, because they need only one product in the bundle. Price framing can evoke a feeling of perceived loss or gain. Differences in bundle-pricing framing also elicit different responses depending on these two goal orientations. In this study the effect of regulatory focus on the perceived loss was explored in relation to the level of need for three bundle-pricing framing examples (Yadav & Monroe, 1993). We combined regulatory focus theory with bundle pricing, and examined the effect on consumers of perceived loss according to different regulatory focuses.

In this study we adopted pure bundling, that is to say, only bundles consisting of one unit of each constituent product (Adams & Yellen, 1976), and we used three bundle pricing alternatives, or frames, representative of different perceptions of the same bundle offer (Yadav & Monroe, 1993). These alternatives were: Frame 1, total transaction value of the items' special prices and the bundle price was the same; Frame 2, total transaction value was a combination of perceived additional savings on the bundle and perceived savings offered on the items; Frame 3, total transaction value was only the perceived additional savings on the bundle.

If consumers need only one of the products in a bundle, they might perceive loss if forced to buy the bundle. However, promotion-focused individuals are insensitive to losses. On the other hand, prevention-focused individuals are affected by losses more than promotion-focused individuals are.

According to Kaicker, Bearden, and Manning (1995), the value function for gains is concave, value (X) + value (Y) is greater than value (X+Y). Thus, segregation is preferred. So, in the situation described in Frame 2, promotion-focused consumers would be expected to perceive greater gains. For Frame 1, the bundle price is equal to the sum of the special prices for products A and B. Here, no bundle effect would occur. For Frame 3, the gains will be lower than for Frame 2, because value (X+Y) is lower than value (X) + value (Y). It would be expected that in this situation the two goal orientations would have little effect. These predictions are summarized as follows:

Hypothesis 1: When consumers need only one product in a bundle, promotion-focused consumers will perceive less loss than will prevention-focused consumers in a buying situation where total transaction value is a combination of perceived additional value on the bundle and also on the items in the bundle.

METHOD

The aim in this study was to examine whether consumers have different levels of perceived loss for different bundle-pricing framing. A 2 (regulatory focus: promotion focus, prevention focus) x 3 (bundle pricing framing: Frame 1, Frame 2, Frame 3) x 2 (need levels: both products or one product of a bundle) between subjects factorial design. Perceived loss for the complete bundle, for product A, and for product B were the dependent variables.

PROCEDURE

Taiwanese undergraduates (N = 217; 114 males and 103 females; average age: 20.10 years) were recruited for participation in this study.

The paper-and-pencil method was used and there were three phases. In the first phase we measured the participants' goal orientation. We used the Regulatory Focus Scale validated in previous studies (Lockwood, Jordan, & Kunda, 2002). The scale has 18 items, nine of which measure promotion focus and the other nine of which measure prevention focus. We used a scale anchored by 1 (not at all true) and 7 (very true), and we averaged responses (a = 0.78 for promotion focus, and a = 0.67 for prevention focus). Following standard practice set out in previous studies, we created a measure of dominant regulatory focus by subtracting the prevention focus score from the promotion focus score. Thus, high scores reflected a relatively stronger promotion focus than prevention focus. Participants were classified as either promotion focused or prevention focused on the basis of a median split (Mdn = 0.2222).

Once they had completed the first phase, for the second phase respondents were asked to read an information sheet in Chinese describing product price stimuli. In the experiment, we offered a choice of consumer goods. Consumers needed to buy products immediately for the price they thought was fair. The products were shampoo (product A) and hair treatment cream (product B). Three kinds of bundle pricing were used and respondents were randomly assigned to one of the three framing conditions. In Frame 1, the regular price of product A and product B was NT$160 for each item: the special price of product A and product B was NT$140 for each item; the bundle price was NT$280. In Frame 2, the regular price of product A and product B was NT$160 for each item; the special price of product A and product B was NT$150 for each item; the bundle price was NT$280. In Frame 3, the regular price of product A and product B was NT$160 for each item; the bundle price was NT$280 (the exchange rate of US dollars to NT dollars is 1:32). Thus, the total bundle price was the same in each frame situation. The price was set from prices in hypermarkets in Taiwan. In addition, the need conditions were divided into the need for both bundled product and the need for product A only. The participants were also randomly assigned to one of the need condition groups.

After the participants read the scenario, they were asked to measure perceived loss. The measurement of perceived loss included two items: (a) I feel that the price for the complete bundle, product A and product B is 7 = very high and 1 = very low; (b) I feel that complete bundle, product A and product B is: 7 = very expensive and 1 = very cheap. Finally, the respondents filled out a section concerning demographic data.

RESULTS

We performed a three-way multivariate analysis of variance (MANOVA), where regulatory focus, bundle pricing, and need levels acted as the independent variables, and perceived loss for product A, for product B, and for the complete bundle were dependent variables. The results for perceived loss for product A, indicated that the main effects of regulatory focus, bundle pricing, and need level were not significant (p > 0.05). In addition, the interaction effect for bundle pricing x need level was significant (p = 0.025). No other effects were significant (all p values were greater than 0.1). The results for the perceived loss for product B indicated that the main effects of regulatory focus, bundle pricing and need level were not significant (p > 0.05). The interaction effect of bundle pricing x need level was marginally significant (p = 0.057). Furthermore, the interaction effect of regulatory focus x bundle pricing x need level was significant (p = 0.024). Given the conditions of Frame 2, when compared with promotion-focused individuals, prevention-focused individuals rated perceived loss higher (p = 0.052). No other effects were significant (all p values were greater than 0.1). For the perceived loss for the complete bundle, no other effects were significant.

In Frame 2 and when they needed only one bundled product, promotion-focused respondents rated perceived loss for product B significantly lower than did prevention-focused respondents ([M.sub.promotion-focused] = 3.47, [SD.sub.promotion-focused] = 0.90, [M.sub.prevention-focused] = 4.10, [SD.sub.prevention-focused] = 0.95, F = 4.047, p = 0.052). Hence our hypothesis was supported.

DISCUSSION

The results of this study demonstrate that for Frame 2, promotion-focused consumers who needed only one product in a bundle perceived a lower level of loss than did prevention-focused consumers.

In the present study we tried to fill a gap in the literature regarding how consumer goals influence decision making, from the viewpoint of regulatory focus theory (Forster, Higgins, & Idson, 1998). We also demonstrated the relative extent to which consumers perceive loss as a function of consumer goals. When firms use bundle pricing they should be aware of whether the framing is suitable for consumer regulatory focus at different need levels. For example, for prevention-focused consumers who may need only one product, it is suggested that the seller should not use bundle pricing when the bundle price is lower than either the special or regular price for one product in the bundle

The method used in our study for measuring regulatory focus was adopted mainly from the study carried out by Lockwood et al. (2002). We expect that future researchers will examine whether the findings in our study, which are based upon manipulating the regulatory focus can be validated. In future studies, we would expect to adopt different bundle-pricing framing to expand our findings, and to explore whether or not the perceived loss may affect consumers' purchase intention. For example, we believe it would be interesting to choose higher priced products to conduct the experiment.

DOI 10.2224/sbp.2011.39.1.113

REFERENCES

Adams, W. J., & Yellen, J. L. (1976). Commodity bundling and the burden of monopoly. The Quarterly Journal of Economics, 90(3), 475-498.

Guiltinan, J. P. (1987). The price bundling of services: A normative framework. The Journal of Marketing, 51(2), 74-85.

Higgins, E. T. (1997). Beyond pleasure and pain. American Psychologist, 52(12), 1280-1300.

Forster, J., Higgins, E. T., & Idson, L. C. (1998). Approach and avoidance strength during goal attainment: Regulatory focus and the "goal looms larger" effect. Journal of Personality and Social Psychology, 75(5), 1015-1031.

Kaicker, A., Bearden, W. O., & Manning, K. C. (1995). Component versus bundle pricing: The role of selling price deviations from price expectations. Journal of Business Research, 33(3), 231-239.

Lockwood, P., Jordan, C. H., & Kunda, Z. (2002). Motivation by positive or negative role models: Regulatory focus determines who will best inspire us. Journal of Personality and Social Psychology, 83(4), 854-864.

Yadav, M. S., & Monroe, K. B. (1993). How buyers perceive savings in a bundle price: An examination of a bundle's transaction value. Journal of Marketing Research, 30(3), 350-358.

Chien-Huang Lin and Chi-Wen Huang

National Central University, Jhongli, Taiwan, ROC

Chien-Huang Lin, PhD, Professor, and Chi-Wen Huang, PhD candidate, Department of Business Administration, National Central University, Jhongli, Taiwan, ROC.

Appreciation is due to reviewers including: Yu-An Huang, Associate Professor in Marketing, National Chi Nan University, Nantou, Taiwan, ROC, Email: yahuang788@gmail.com

Please address correspondence and reprint requests to: Chi-Wen Huang, Department of Business Administration, National Central University, No. 300, Jhongda Rd., Jhongli City, Taoyuan County 32001, Taiwan, ROC. Phone: +886-3-4227151, ext. 66121; Fax: +886-3-4222891; Email: tina81572004@hotmail.com
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Author:Lin, Chien-Huang; Huang, Chi-Wen
Publication:Social Behavior and Personality: An International Journal
Article Type:Report
Geographic Code:9TAIW
Date:Feb 1, 2011
Words:1931
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