Price Bundling in Couponing

Take a look at these two coupons Target stores printed out at checkout at the same time. What is your take on the reasoning behind this?

If you have the read the famous Target Big Data story about targeting, you are more likely to reason that they understand the customers so well and are targeting (no pun) right. But as a Big Data fan you cannot overlook the fact that they gave two different coupons and not the precise one that I am more likely to use next. Remember like predicting the teen pregnancy experiment, Target likely runs hundreds of such experiments everyday and only the ones that are successful make it to The New York Times.

If you are not a proponent of Big Data and not so forgiving of retailer Ad targeting you will most likely conclude this as  just poor targeting, Target is throwing everything at customer hoping one will connect.

If  you are lot more cynical of how enterprises work you will dismiss this as just a mistake and not even any experiment.

However there is another possible explanation which is more likely -price bundling. The $2.50 discount on first bottle is just a straight up promotion. But look at it this way

  1. Buy single bottle at $2.50 off
  2. Buy two bottles at $2.50 off ($2.50 on first, $0 on second)
  3. But three bottles at $3.00 off ($0 on first, $0 on second, $3 on third)
  4. Buy four bottles at $5.50 off ($2.50 on first, $0 on second, $0 on third, $3 on fourth)

In other words with two coupons they have created four different bundling options, enticing you to buy more than you would have and also soaking up the demand.

This is a highly plausible explanation than just mistake or bad targeting.