Bundling as a strategy for new product introduction: Effects on consumers' reservation prices for the bundle, the new product, and its tie-in

Abstract

This research investigates the effects of bundling on consumers' reservation prices for the bundle and its components including a new product (i.e., the primary product) and a tie-in product. Based on a quasi-experimental procedure (n = 180) involving mixed-product bundles of personal care products, the study examines the effect of the product combination, the form of the bundle (whether a within- or between-brand bundle), and attitudes toward the brand(s) as important determinants of consumers' evaluation of the bundle itself. The results show that prior attitudes toward the component brands significantly affect the evaluation of the bundle, which, in turn, mediates the influence of these prior attitudes on consumer reservation prices for the bundle itself and, subsequently, for both the new product and the tie-in individually.