Consumer perceptions of bundles and time-limited promotion deals: Do contracts matter? LISA MCQUILKEN 1 *, NICHOLA ROBERTSON 2 , MICHAEL POLONSKY 1 and PAUL HARRISON 2 1 School of Management and Marketing, Deakin University, Burwood, Victoria, Australia 2 Deakin Graduate School of Business, Deakin University, Burwood, Victoria, Australia ABSTRACT Marketers use various types of deals to positively influence consumers’ product evaluations. Across two experiments, we manipulated print advertisements to examine whether the commonly used deal content of both bundling and time-limited promotions affect consumers’ perceived confusion, risk and value. In study 1, the influence of this content was tested in the context of a 2-year telecommunications (telco) contract. Here, consumers associated a three-item bundle with greater perceived value than a single item, but perceived value was reduced and risk heightened when it was only available for a limited time. We speculate that this is because of the long-term nature of the contract. Study 2 removed the contract restriction, examining the bundling of a video game console and game(s), again with a time-limited promo- tion. However, in this context, we failed to locate any interaction effects. It appears that consumers further appraise the drawbacks of a long- term telco contract when accompanied by a time-limited promotion and may perceive the switching costs for study 1 three-item telco bundle to be particularly risky. Our studies represent the first empirical investigation of the effect on consumers’ perceptions of offering a bundle in conjunction with a time-limited promotion. Testing these effects in contract and no contract conditions adds to the contribution of our stud- ies by delineating a boundary condition. From a managerial perspective, our findings are thought-provoking in respect to information integration, or how consumers process different deal content together. Copyright © 2015 John Wiley & Sons, Ltd. INTRODUCTION Bundling two or more goods and/or services together is com- monplace in many consumer industries, including telecom- munications (telco), fast food, health and fitness, energy utility, cruise line, video games, and travel (Naylor and Frank, 2001; Woolf, 2008). Consumer perceptions and behavior are heavily influenced by how bundles are designed and promoted (Sinha et al., 1999), such as their configuration (i.e. packaging two or more together for a special price) and time-limited promotions (e.g. “Hurry, last days, special ends…”). Such marketing communications often stress that offers are only available for a restricted time (Inman et al., 1997), such as “sale ends Friday”. Time restrictions are the most frequently used “scarcity appeal” in print advertise- ments (Howard and Kerin, 2006). Organizations employ such promotions to potentially increase desire for products per- ceived as scarce; that is, fear of missing out causes consumers to make prompt purchase decisions (Devlin et al., 2007). In some industries, organizations also use fixed-term con- tracts to reduce consumer switching behavior. A contract is an agreement between parties involved in the exchange of a good and/or service (Bar-Gill and Ben-Shahar, 2014); it defines the subject matter of an exchange (Lusch and Brown, 1996) and includes terms and conditions that express both parties’ rights and obligations including the duration of the exchange. A failure to abide by these terms and conditions could result in a breach of contract (Bar-Gill and Ben-Shahar, 2014) that can incur penalties, such as fees charged for early termination of a term deposit (Laksamana et al., 2013), utility service (Caruana, 2004) or telco contract (Chuang, 2011). By committing to a long-term (e.g. 1 or 2-year) contract, consumers usually enjoy upfront benefits (e.g. free or heavily discounted mobile handset, or reduced call rates). However, while such benefits are undoubtedly appealing to consumers, contracts frequently contain complex specifica- tions (Malhotra and Malhotra, 2013), and “contract ‘fine print’ rarely contains happy surprises” (Bar-Gill and Ben-Shahar, 2014: 31). Long-term contracts generally include substantial switching costs—financially punitive ways of keeping consumers “locked in” (Laksamana et al., 2013; Malhotra and Malhotra, 2013). Switching costs are “the real or perceived costs that are incurred when changing supplier” (Xavier and Ypsilanti, 2008: 14). For example, an energy utility’s customers who sign an undertaking to remain loyal for a certain period will pay an early termina- tion fee (ETF) if they switch prior to the end date (Caruana, 2004). Switching costs are, therefore, disutilities that consumers try to avoid (Molina-Castillo et al., 2012). In this paper, we examined the effects of the commonly used deal content of both bundling and time-limited promo- tions on consumer perceptions of confusion, risk and value. Consumers’ perceived confusion is reported in the context of deals where product offerings become inherently more complex and thus confusing. Similarly, consumers commonly perceive risk when offers are multifaceted. In regard to perceived value, bundling and time-limited deals are referred to as a “value-based strategy”. We studied these independent (manipulations) and dependent variables in both contract and non-contract contexts. In study 1, we conducted an empirical examination of the effects of deal content (i.e. bundles and time-limited promo- tions) in telco plan (contract) advertising. At the time of our study, most mobile phones were acquired via 24-month plans (i.e. consumers sign up for a 2-year contract and receive a mobile bundled with a range of call and usage features). In *Correspondence to: Lisa McQuilken, School of Management and Market- ing, Deakin University, 221 Burwood Highway, Burwood, Victoria 3125, Australia. E-mail: lisa.mcquilken@deakin.edu.au Copyright © 2015 John Wiley & Sons, Ltd. Journal of Consumer Behaviour, J. Consumer Behav. (2015) Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/cb.1513