When 2 + 2 is Not the Same as 1 + 3: Variations in Price Sensitivity across Components of Partitioned Prices

Abstract

Firms often use a pricing strategy in which the total price of a product and/or service is partitioned into two or more mandatory components. Whereas previous research has compared partitioned with nonpartitioned pricing, this article examines how partitioning the total price differently across the components affects consumer preferences. In four studies, the authors show that consumers' reactions to price partitioning are moderated by the perceived consumption benefit of the components. Specifically, consumers are more sensitive to the price of components that provide low consumption benefits than to the price of components that provide relatively high consumption benefits. Consequently, when evaluating different partitions of the same total price, consumers prefer partitions in which the price of the low-benefit component is lower and the price of the high-benefit component is higher.