Pricing hybrid bundles by understanding the drivers of willingness to pay

Jeffrey Meyer (), Venkatesh Shankar () and Leonard L. Berry
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Jeffrey Meyer: Bowling Green State University
Venkatesh Shankar: Texas A&M University
Leonard L. Berry: Texas A&M University

Journal of the Academy of Marketing Science, 2018, vol. 46, issue 3, No 8, 497-515

Abstract: Abstract Many companies are increasingly selling hybrid bundles, which comprise one or more goods and one or more services. Hybrid bundle pricing depends on understanding consumer willingness to pay (WTP) for the bundle, which rests on trade-offs among the benefits from four key drivers: service autonomy, complementarity, service quality variability, and overall bundle quality (basic vs. premium). The effects of these drivers and their interactions on the WTP of hybrid bundles are unknown. The authors develop hypotheses and test them rigorously using incentive-aligned choice-based conjoint and hierarchical Bayesian analysis. The results offer important guidelines for developing appropriate hybrid bundles. If a typical firm under budget constraint has to offer either of two hybrid bundles, one with high complementarity or one with service autonomy, the results suggest that it should offer the bundle with high complementarity. Furthermore, contrary to the conventional wisdom of minimizing service quality variability for premium quality bundles relative to basic quality bundles, the results recommend lowering service quality variability for basic quality bundles but maintaining it for premium bundles.

Keywords: Hybrid bundles; Conjoint analysis; Willingness to pay; Service quality (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s11747-017-0546-5

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