Bundle Expensive & Cheap Synergistically

A consumer electronics store charges $2,000 for a high-definition television and $10 for a video cable. How much would consumers be willing to pay for the two items together? Maybe $2,005, with the customer figuring that the retailer has already made enough profit on the HDTV sale?
     How about $1,950? Less than the price of the HDTV on its own. That’s what researchers at Pepperdine University and Northwestern University discovered. Participants in their study said they’d pay $2,000 for the television and they’d pay $10 for the cable, but later said they’d expect to pay $1,950 for the combination.
     The reason seems to be that grafting an inexpensive item onto an expensive item cheapens the price image of the expensive item. The same phenomenon occurred when the Pepperdine/Northwestern researchers paired a tote bag with a premium-priced suitcase. It happens with other product categories like scooters, barbeque grills, telephones, jackets, and backpacks. On average, consumers’ acceptable price points decreased by about 25% when a trinket was added onto a treasure. Of equal concern is that consumer interest in purchasing the expensive item decreased by about 15%.
     One remedy is to wait until the shopper has made the decision to purchase the expensive item and then offer the inexpensive item as a free thank-you gift. You might earn gratitude from the surprise, even though the item is viewed as a trinket.
     A better way to avoid the price depreciation is to point out the synergy in the two or more items you’re offering. Talk about how the items bring out the best in each other. This dissolves the shopper’s impression that the inexpensive item has been grafted onto the expensive one. This impression is, after all, what’s behind the decrease in willingness to pay.
     Research findings from Singapore Management University and Korea’s Kyung Hee University suggest that in situations like this, you describe to the potential purchaser how well the various functions work together. Instead of focusing on the different capabilities, focus on the added benefits that come from the synergy.
     The Singapore/Kyung Hee research indicates that this is especially useful with items the shopper considers to have a high level of technological performance. It is more important with smart phones than with toothpaste. However, because cultures vary in the thresholds consumers set for high technology, the value of pitching synergy differs by culture. Assess what works with your shoppers.

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more:
Pitch the Synergy of Multifunction Items
Profit from Product-Service Synergy