The impact of service bundles on the mechanism through which functional value and price value affect WOM intent

Abstract

Purpose

The purpose of this paper is to contribute toward the current limited understanding of service bundles by investigating how purchasers of combined product-service bundles (bundle customers) differ from those purchasing a product and associated service separately (non-bundle customers).

Design/methodology/approach

The hypothesized effects were tested on a representative sample of mobile phone subscribers in Finland, through a multi-group moderated analysis using variance-based structural equation modeling.

Findings

While functional value had a stronger effect on attitude for bundle customers, price value is a stronger determinant of attitude for non-bundle customers. There was no difference between the groups in terms of how attitude determines the word-of-mouth (WOM) intent. The total influence of functional value on positive WOM intent was stronger for bundle customers vs non-bundle customers; in contrast, the total influence of price value on positive WOM was weaker for the bundle customers.

Research limitations/implications

Two interrelated frameworks, prospect theory and mental accounting theory, are used to analyze customer response to service bundles. The results demonstrate that bundles play a powerful role in determining engagement behaviors critical to firms. Purchasing a service bundle vs a non-bundle influences how price value and functional value determine attitude and WOM intent in fundamentally different ways.

Practical implications

In devising communication strategies to maximize positive WOM, managers need to emphasize functional benefits for bundle purchasers and price benefits for non-bundle customers. The results also demonstrate that it is more important for firms to track perceived value, as value and not attitude differentiates WOM generation in the two groups.

Originality/value

This is the first study to demonstrate how bundle and non-bundle customers determine value, and how functional value and price value determine WOM generation and attitude toward service provider in fundamentally different ways. The comparison of the bundle group where the firm acts as the main resource integrator to a non-bundle group where the customer is the main resource integrator in creating value helps demonstrate the need for firms to treat the two groups in distinct ways.

Citation

Ranaweera, C. and Karjaluoto, H. (2017), "The impact of service bundles on the mechanism through which functional value and price value affect WOM intent", Journal of Service Management, Vol. 28 No. 4, pp. 707-723. https://doi.org/10.1108/JOSM-03-2016-0065