Group 2 – Abhinandan | Divya | Nityananda | Tanya | Vijay

How Buyers Evaluate Product Bundles: A Model of Anchoring and Adjustment

Bundling, which is the marketing of two or more products or services as a package is frequently
used by firms. Both customer and industrial products are involved in bundling strategies. There has
been a lot of research done to evaluate bundling. But the research has been either limited to only
market-level analyses without emphasizing on consumer’s buying behavior or unclear
demonstration of buyer’s bundle evaluation by the concept of additivity or averaging. In this article,
a new model is developed and tested on how buyers evaluate bundle offers.
Anchoring and Adjustment model of Bundle Evaluation
In order to simplify the task of bundle evaluation, buyers can approach the evaluation task by using
anchoring and adjustment heuristic to form a series of smaller and simpler evaluations. Anchoring
and adjustment includes an initial assessment, which is followed by one or more adjustments and
has been proved applicable in various judgement tasks. Three stages were identified for bundling
evaluation, which are: i) Scanning, ii) Anchor selection and iii) Anchoring and adjusting.
Three hypotheses were determined to evaluate this model. They are:
H1: Overall evaluation of the bundled items is formed by examining bundled items in decreasing
order of perceived importance and making adjustments in the direction of succeeding evaluation of
items.
H2: Weighted average will be the result of adjustments made during the evaluation of the bundled
items.
H3: Insufficient adjustments made during the bundled items evaluation will result in creating
biasedness in the direction of first evaluated item.
These hypotheses were tested by conducting two experiments, which incorporated various
methodological approaches like ANOVA, protocol analysis and regression. While experiment-1
explored H1 and H2, experiment-2 explored H3.
In study-1, for selection of appropriate bundled products and test product descriptions, four pretests
were conducted based on which multi-item measures were developed for variables: i) Overall
bundle evaluation, ii) Item evaluation, iii) Relative item importance, iv) Order of examination.
The experiment ranged from evaluating individual items to evaluating three item bundles. Since
study-1 has the inability to explore the nature of adjustments occurring during anchoring and
adjustment, study-2 explores the biasing effect associated with the order of examination of items.
 Group 2 – Abhinandan | Divya | Nityananda | Tanya | Vijay

Results of the experiments

The experiments suggest the following results:
The order of examination of bundled item by the buyer is in the decreasing order of perceived
relative importance. This makes insufficient upward and downward adjustments which form the
bundle evaluation. The degree of consistency of the overall bundle evaluation varies with the anchor
type, which can be excellent or poor. In case of an excellent anchor and moderate add-on items, the
bundle evaluation is adjusted downwards, but in case of the poor anchor and moderate add-on
items, the upward adjustment for bundle evaluation is considerably less. Also the harmful effect of
moderate items on excellent anchors is greater than the enhanced effect on poor anchors. This
suggests that firms should recognize that while seeking out probable items for bundling with an
anchor, it is easier to hurt it than to help it, and thus consistent quality levels are important in a
bundle. It was observed that there was bias due to insufficient adjustments in the three-item bundles
but not in two-item bundles. The three-item bundles evaluation seems to be driven by first two
items, which shows that buyers may avoid making adjustments after first two items. Thus it can be
deduced that non-compensatory evaluation may be triggered in case of larger bundles where buyers
take either only some part of the total information into consideration or keep all the items in short
memory. Since these processes appear to be difficult when compared with sequentially integrating
information by using anchoring and adjustment, buyers most likely may use a simplified strategy
like anchoring and adjustment. But the heuristic’s sequential nature and its insufficient adjustments
may result in biased evaluation of bundles.

Limitations and Research Opportunities

This article focused only on the non-price information role in evaluation of bundling. As both price
and non-price information are important for acquisition and transaction value formation, future
research should be made using both types of information. Also, additional research should be done
to understand price and non-price information roles in the process of bundle evaluation.