Title
Why Bundle Discounts Can Be a Profitable Alternative to Competing on Price Promotions
Abbreviated Journal Title
Mark. Sci.
Keywords
bundling; competitive marketing strategy; game theory; price promotions; brand loyalty; STRATEGIES; SALES; OLIGOPOLY; PRODUCTS; MONOPOLY; MARKETS; LOYALTY; GOODS; MODEL; Business
Abstract
Price promotions and bundling have been two of the most widely used marketing tools in industry practice. Past literature has assumed that firms respond to price promotions by promoting a product in the same category. In this paper, we extend this literature as well as the bundling literature by considering the possibility that a firm may respond to a competitor's price promotions by also offering a cross-buying or bundling discount. Using a game-theoretic model, we show that bundle discounts can help increase profits in a competitive market by creating endogenous loyalty, thereby reducing the intensity of promotional competition. We also find that bundle discounts can be used as an effective defensive marketing tool to prevent customer defection to the competition.
Journal Title
Marketing Science
Volume
29
Issue/Number
4
Publication Date
1-1-2010
Document Type
Article
Language
English
First Page
624
Last Page
638
WOS Identifier
ISSN
0732-2399
Recommended Citation
"Why Bundle Discounts Can Be a Profitable Alternative to Competing on Price Promotions" (2010). Faculty Bibliography 2010s. 6970.
https://stars.library.ucf.edu/facultybib2010/6970
Comments
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