matthews, christopher paper 167

7/27/2019 Matthews, Christopher Paper 167

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Wine Product Bundling: Who are the consumers? An exploratory study

* Christopher Matthews, University of AdelaideThe University of Adelaide Business School

Email:[email protected]

Simon Somogyi, University of QueenslandUniversity of Queensland, School of Agriculture & Food Sciences

Email: [email protected]

Rob Van Zanten, University of AdelaideThe University of Adelaide Wine Science and Business

Email:[email protected]

Keywords: Product Bundling; Segmentation; Wine Bundling; Wine
mailto:[email protected]:[email protected]


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Abstract

Product bundling is a widespread marketing strategy (Stremersch & Tellis, 2002; Yadav,1994; Yadav & Monroe, 1993). Part of the attraction of a bundle is that the price is less thanthe sum of the prices for each of the products in the bundle. The strategy has been most

recently used by large retailers in Australia, particularly liquor retailers who often bundlewine with other liquor products. However, there exists a paucity of research into consumer

behaviour regarding wine product bundles. Hierarchical segmentation analysis via K-Meancluster analysis was used to examine the nature of consumers perceptions of wine product

bundles and commonalities among those consumers. Three clusters of wine product bundleconsumers were identified. The information gained from this exploratory study was aimed atassisting the wine industry when formulating wine product bundles for the consumer.

Introduction

Product bundling is a marketing strategy, which has become quite common in the market

place, particularly in the Australian wine industry. In a wine industry context, this techniqueinvolves bundling bottles of wine with other liquor products and paraphernalia, such as beer,spirits, other types of wine (e.g. sparkling wine) and items such as clothing, coasters, etc.,which are sold at a single price. The bundle is then sold at a lower price than the sum of theindividual products contained therein. This technique is particularly prevalent with the largerliquor retailers (such as Dan Murphys and 1st Choice Liquor), who routinely bundle a caseof wine (a case being a unit of 6 or 12 bottles) with a case of beer (24 cans). While literatureon the subject discusses the concept of product bundling, there is an absence of researchspecifically related to wine product bundles. Furthermore, little has been discussed about thetypes of consumer who would be interested in wine product bundles. As such, this paper willfocus on generic product bundling and its application in a wine context by highlighting an

exploratory study into the nature of wine product bundle consumers through K-means clusteranalysis. The paper will discuss three aspects as follows. Firstly, literature currently availableregarding product bundling; secondly, methods used to uncover the wine product bundleconsumer; and, thirdly, results, discussion and areas for further research.

Literature Review

Product Bundling

Wine product bundling has received minimal attention, if any, in available literature. As such,this discussion will focus on literature currently available with regard to generic product

bundling. The latter reveals that the two most common forms of bundling are: (1) pure

bundles; and (2) mixed bundles (Adams & Yellen, 1976; Koukova, Kannan, & Ratchford,2008; Stremersch & Tellis, 2002). Pure bundles differ from mixed bundles in that the

products are not offered for sale separately. Different areas of product bundling have beenaddressed over time, including: consumers evaluation of bundles, (Heeler, Nguyen, & Buff,2007; M. D. Johnson, Herrmann, & Bauer, 1999; Nguyen, Heller, & Buff, 2009; Yadav,1994; Yadav & Monroe, 1993); presentation and formulation of the product bundles (Hanson& Martin, 1990; Mulhern & Leone, 1991); and economic theories related to product bundling(Adams & Yellen, 1976; Burstein, 1960). Product categories selected for prior research havegenerally allowed for a particular research issue to be conveniently studied. These productcategories have included attributes such as everyday use, well known brands, a symmetry

between the products being bundled (close fit), ease of functional integration, andcomplementarity or balanced products (for example, a fast food meal offering two types of


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food in the same bundle). Wine product bundling offers a new dimension in the field ofbundling research as it differs in at least three important attributes compared to the productcategories typically used for this type of research. These attributes include: (1) a highlyfragmented market, whereby no single company dominates the market and consumers areoffered hundreds of wines in the setting of a traditional liquor outlet (Alonso & Liu, 2009);

(2) the notion that a wine purchase is relatively high in risk (T. Johnson & Bruwer, 2004;Lacey, Bruwer, & Li, 2009); and (3) the notion that a wine purchase is often for an occasionand for occasion enhancement (Bruwer & Li, 2007; Spawton, 1991). In addition to theseattributes, what must be highlighted is the concept that a product bundle is a type of deal.Therefore, any discussion on literature with regard to product bundling must also highlightliterature into how prone consumers are towards a deal. This is discussed in the nextsection.

General Deal Proneness

Wine product bundling is a type of a deal, whereby consumers purchase two or moreproducts at a price discounted from the sum of their individual prices. As such, it can besurmised that consumers who are attracted to wine product bundles are also prone to deals.Lichtenstein et al. (1995) discusses the nature of consumers perceptions of deals anddeveloped an eight item scale, with the intention of measuring the level of consumersenjoyment of sales promotions and their tendency to buy the products associated with suchdeals. They also aimed at assessing whether consumers were prone to specific types ofdeals. Their scale could additionally be used across different types of promotions. Althoughtheir results showed that the proneness to deal was domain specific, the general deal

proneness scale has nevertheless been widely utilized in the literature. As such, it is ofinterest to observe the extent of deal proneness in wine consumers particularly as wine

product bundles can reasonably be considered to be a deal.

The preceding literature has highlighted various aspects of product bundling, includingconsumers perceptions of product bundles (deals). As has been discussed, the nature ofconsumer behaviour regarding wine product bundling has not been identified and was the

purpose of this research. In this connection, this paper will attempt to uncover consumersegments interested in wine product bundles. The next section of this paper will discussresearch methods employed to uncover these segments.

Method

To obtain the data necessary to uncover wine product bundle consumer segments,quantitative survey interviews were conducted. Interview respondents were filtered by threecriteria: (1) over 18 years of age; (2) resident in South Australia; and (3), wine consumers.The survey was conducted in 14 locations within South Australia. These included liquorstores, cellar door sales, regional visitor centres and main thoroughfares. A total of 262 validquestionnaires were obtained. The questionnaire was comprised 33 questions within threesections: (a) introductory questions; (b) specific product bundling questions; and (c)demographic questions.

The introductory questions contained a scale in relation to general deal proneness(Lichtenstein, et al., 1995), which formed the basis for clustering analysis. Otherintroductory questions included respondents alcohol consumption patterns and the average

price they would pay for the product categories contained in the stimuli. Specific productbundling questions included six items on consumers perception of: (a) convenience; (b)discount; (c) value for money; (d) the reason for product bundling; (e) wine quality within the


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product bundle; as well as (f) the intention to purchase. These were all measured on a fivepoint Likert scale. These constructs were chosen as prior research into product bundlingsuggested they were major factors in relation to: (a) consumer behaviour, perceived value andintention to buy (Andrews, Benedicktus, & Brady, 2010); (b) expectations and buyingobjectives (Puto, 1987); and (c) price discounting (Arora, 2008; Heeler, et al., 2007; Puto,

1987; Yadav & Monroe, 1993). Respondents were presented with three pictures (i.e. stimuli)representing three product bundles: (a) Wine-Champagne; (b) Wine-Beer; and (c) Wine-Spirit.

The issue of possible bias (Aaker, Kumar, Day, & Leone, 2010; Charters, Lockshin, &Unwin, 1999) included: (a) prestige seeking; (b) social desirability; (c) labels/brands; and (d)

price. This was addressed by creating bundles devoid of brands, quality and price.Additionally, the stimuli were randomised. It was considered that the absence of price,quality and brand reference points may present the respondent with some computationaldifficulty. Therefore a simpler two-product bundle was chosen for the said stimuli (Agarwal& Chatterjee, 2003).

Hierarchical K-mean cluster analysis was used to segment the respondents. An activevariable of general deal proneness was used in this clustering, as a relationship betweendeal proneness and product bundle attraction exists. Exploratory factor analysis usingPrinciple Component Analysis was performed on the scale items for deal proneness. It wasshown that the scale was extracting on one component. A Cronbach Alpha test wasconducted on the general deal proneness scale (Lichtenstein, et al., 1995), which resulted in a.833 alpha. This suggested that the scale was reliable. K-means cluster analysis was alsodeemed an appropriate analysis method as it has been used numerous times to classify wineconsumers in previous research (Bastian & Johnson, 2007; Bruwer & Li, 2007; Bruwer, Li, &Reid, 2002). The analysis was performed using Ward method and the resulting dendrogram

uncovered three distinct clusters. Using the trial method discussed by Hair et al. (2006) andJanssens (2008), four clusters were uncovered, but one was rejected on the grounds that itcontained too few respondents (less than 10). As such, the respondents were then clusteredinto the three groups, and ANOVA and cross-tab analysis was performed to see how theclusters perceived the active variable of deal proneness. ANOVA and cross-tab analysiswere also performed to see how the clusters perceived the passive variables, i.e. thedemographic information of the participants, their consumption by volume of the varioustypes of alcoholic drinks and their perceptions of the wine bundles.

Tukey and Bonferroni tests and post-hoc F-tests were performed to see if there was astatistical difference between the clusters in terms of active and passive variables. The tests

showed that this difference was statistically significant (Janssens, et al., 2008). All testresults, which were significant between the groups, were retained in the clusters. Statisticalanalysis of the responses was conducted using SPSS v17


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Results

The following segments were identified from the cluster analysis

Affluent, Champagne Buying, Deal Avoiding, Bundle Selectors (n=55 21%)

The main characteristic of the affluent, champagne buying, deal avoiding bundle selectors istheir non-tendency towards deals. Demographically, this cluster has a high household income(i.e. more than 50% have incomes between $75,000-150,000), and they tend to be highlyeducated (i.e. more than 50% have a bachelor degree or higher). The Wine-Champagne

bundle was most likely to be purchased by this cluster, with more being spent on Champagnethan by the other two clusters. However, compared to the young, deal prone bundle seekersand the older, wealthy educated deal wavering bundle evaders, this group did not favour anyspecific wine bundle.

Young, Deal Prone, Bundle Seekers (n=102 39%)

The distinctive characteristic of this cluster is its tendency for deals, which makes them veryinteresting in the context of wine product bundling. This cluster has the highest intention for

purchasing wine product bundles across the three wine product bundle types. Whenpurchasing wine the young, deal prone bundle seekers rate promotion, price and discountsmore highly than affluent, deal avoiding bundle selectors or the older, wealthy educated dealwavering bundle evaders. In addition, this cluster tends to be the youngest group (i.e. 53%aged between 18-39 years) and has the lowest household incomes (i.e. 47% earn less than$75,000). Young, deal prone bundle seekers also have lower education qualifications (i.e.40% have a vocational certificate or lower). This cluster tends to pay less for Champagnethan the other two clusters.

Older, Wealthy, Educated, Deal Wavering, Bundle Evaders (n=105 40%)

Although this clusters level of proneness towards deals is higher than the affluent, dealavoiding bundle selectors, it remains less deal prone. It also has the oldest respondents of allthree clusters (i.e. 62% are aged above 44 years) and tends to have the highest householdincomes (i.e. 48% have incomes greater than $100,000). Older, wealthy, educated, deal-wavering, bundle evaders also have the highest education of the three clusters, with 21%having a postgraduate diploma or higher. Interestingly, this group does not favour any of thethree bundles more than the other.

Discussion and Implications

This exploratory study identified a number of wine product bundle consumer segments.Three consumer-type clusters were uncovered that can be used in the context of marketingwine. Of specific interest is the young, deal prone bundle seekers cluster. It tends to beyoung and have less household income than the other two clusters identified in the research.It has a propensity toward promotions and discounts, and price is an important factor in wine-

purchase decisions. These attributes offer wine marketers the opportunity to target this clusterwith advertising and wine product bundles built around their profile. This cluster mainlycontains Generation Y consumers and, as such, wine product bundling may be an avenue toattract these consumers more towards wine (Nowak, Thach, & Olsen, 2006). The affluent,deal avoiding bundle selectors and the older, wealthy, educated, deal wavering, bundleevaders also provide wine marketers with opportunities, but in a more limited way. Marketintelligence gained from this research also suggests that some market segments should be


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avoided when formulating wine product bundles. Nevertheless, more research needs to beundertaken to correlate these clusters with their perceptions and intentions to buy wine

product bundles, so as to form actionable outcomes. An interesting observation is that certainclusters, particularly the affluent, deal avoiding, bundle selectors, tend to avoid deals but

purchase bundles, if only a certain type.

Conclusion and Future Research

This exploratory study does not provide significant data to create actionable outcomes for anindustry-wide approach to product bundling. However, it does provide a critical starting pointfor further research into this marketing strategy in the wine context. Also, this research hasuncovered that wine product bundling is a marketing strategy that is amenable to alcoholconsumers. An anecdotal review of advertisements and in-store offerings suggests that wine

product bundling is still at an embryonic stage market. However, it is a strategy that is being

employed by large wine companies to gain access to large wine retailers. The results of thisstudy have revealed that wineries need to focus on targeting the consumer segment (cluster)most likely to seek wine product bundles. Furthermore, SME wineries have experienceddifficulty gaining access to large liquor retailing in Australia. By bundling their wine

products with spirits, beer and champagne, SME wineries may gain greater access to thisretail format. It can be suggested that wineries also need to be producing beer and spirits (and

joint venturing with champagne houses) to gain access to these consumer segments andtherefore large liquor retail outlets. The results of this study have shown that product

bundling is a marketing strategy which can be used by the wine industry, as there areconsumer segments willing to buy the bundles.

Due to the exploratory nature of the study the results have various limitations. Firstly, thesurvey was limited to the South Australian wine market and the scope of the questions waslimited to a small number of constructs considered important for an exploratory study and asmall sample size. As such, further research needs to be performed utilising a larger samplesize with a greater geographic scope and a larger instrument. A further limitation in thisresearch was the simple presentations that served as stimuli in the survey. Further researchcould provide stimuli that involve brand names, quality inferences and bundle prices.

More investigation could be made into the highly deal prone cluster, which was younger andconsisted mainly of generation-Y consumers. It would be of interest to further investigatewho these consumers are purchasing for, whether they are simply purchasers or actual

consumers of the bundled products, and which of the product bundles they would be mostlikely to buy. Additional insight could be obtained through qualitative in-depth interviews orfocus group sessions that probe these issues or by quantitative surveys that test consumersthis segment. An observation of interest from the study is that the affluent, deal avoiding,

bundle selectors have a tendency to bypass deals however they are willing to purchasebundles. It was surmised that consumers who were deal prone would also be attracted tobundles and vice versa. Nevertheless, this observation appears to be contradictory. Additionalresearch could further explore this anomaly and thereby investigate the affect that deal

proneness has on wine bundle purchase intention.


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matthews, christopher paper 167

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