Zero price or token price? The impact of bundle promotional format on promotional attractiveness and value discounting

Purpose This study aims to explore the relative attractiveness of freebie (e.g. “buy one, get one free”) and token-price (e.g. “buy one, get the second one for only 1¢”) promotions in the short run and value discounting effect for the separate items in the long run. Design/methodology/approach Two imaginary-scenario and two incentive-compatible experiments test the hypotheses. Findings Token-price promotions are more attractive than freebie promotions no matter if the supplemental item is identical to the focal item or not. Moreover, when the two items are identical, consumers who encounter a token-price (vs freebie) promotion express stronger value discounting for the focal item. This effect reverses when the items are nonidentical. Research limitations/implications Future research should examine whether the bundle promotional format effect differs with the amount of the token price and the complementarity of the focal and supplemental items. Practical implications Practitioners can draw on the findings to determine when to use freebie or token-price promotions and how to adjust bundle promotional strategies according to the type of the supplemental item. Originality/value This study improves understanding of the effects of freebie and token-price promotions, especially over the long-term. Based on mental accounting theory, the authors build a comprehensive framework that explains how the bundle promotional format influences promotional attractiveness and value discounting.