Beware of Bundles: Avoid The Assumption of Savings

It's easy to assume that packages or bundles provide some kind of special value but they're playing tricks on you. Save money by not falling for it.

People that sell stuff know something. They know that we love bundles. What is a bundle? Think of a "combo" meal at a fast food restaurant that includes a burger, fries, and a drink. That is a bundle, also sometimes called a package.

And bundles are very good at selling more product:

 

We begin our discussion by noting that when bundling items together, firms often find that consumers purchase items that they would not ordinarily purchase if the items were only available individually (Stremersch and Tellis 2002). For example, in a study, which we describe subsequently, that uses the fast-food industry as the context, we find that the demand for French fries increases when a bundle is offered. More specifically, 15% of customers who did not purchase fries in an à la carte–only offering purchased fries when a bundle was present; furthermore, 26% of the sample who had originally purchased fries à la carte increased their portion sizes when a bundle was offered.

Consumption Effects of Bundling: Consumer Perceptions, Firm Actions, and Public Policy Implications
Kathryn M. Sharpe and Richard Staelin


We often assume that these bundles offer some kind of special value. After all, at one point they were referred to as "value meals", right? And, since we generally expect some kind of volume discount, it's easy to assume that these combo meals offer some kind of discount.

The generally offer little, if any, discount for one simple reason: they don't have to. The appeal of the bundle is so strong that no discount is needed.

The real value is often convenience, something we value highly. If you are standing in the snack line at the local movie theater, trying to keep your kids from wandering off (or fighting or otherwise causing trouble) the prospect of adding up the cost of popcorn(s), drink(s) and candy in your head can be daunting. This touches on what is known as the ambiguity effect – a cognitive bias where decision-making is affected by a lack of information. Not knowing how much all those snacks are going to cost is somewhat stressful.

The packages avoid all that. They offer you the chance to avoid surprises and skip the math – just agree to a single price on a bundle that seems like it includes everything you need. There is value there in this form of convenience.

And it is OK to pay for convenience. People do it all the time. If you stop at the full-service pump on cold or rainy day you are placing comfort and convenience ahead of price. If you stop at the convenience store and willingly pay more for groceries because you don't want to trek to the grocery store, Costco or Sam's Club you are again placing convenience ahead of price. People often place a premium on convenience.

But you should understand the tradeoff. Any savings on a fast food package or movie theater bundle are likely to be small. Very small – typically under 5%. If the bundle or package isn't exactly what you want the convenience may not be enough.

If you really don't want the candy that comes with the movie theater combo, or the fries that comes with the fast food bundle, just order the items you do want separately. Try to remember that bundles play tricks on your brain, and that you will be saving money (and often calories) by only ordering what you really want. Don't get tricked into spending more on the bundle in the belief it is somehow saving you money.