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Executive Summary
It is well accepted that over the last five decades, Americans have been consuming more calories, have been gaining weight, and are now more likely to become obese. This article examines a possible source of this increase in consumption: the marketing practice introduced by fast-food restaurants of bundling together a burger, a soft drink, and fries at a price discount (i.e., “the combo meal” or “the value meal”).

Using a series of virtual shopping experiences, the authors find that demand for French fries increases when a bundle is offered. In this study, 15% of the sample who did not purchase fries in an à la carte–only setting purchased fries when a bundle meal was included in the menu offerings; furthermore, 26% of the sample who originally purchased fries à la carte increased their portion size of fries when a bundled meal was offered. Even after controlling for the effect of price discounts, the authors demonstrate that consumers place higher value on the bundled meal than purchasing the individual items separately. The authors attribute this increased sense of value to consumers shifting to the combo meal with the view that ordering the bundled meal reduces transaction costs and increases the saliency of the “featured” items on the menu board.

The authors use each consumer’s observed purchase behavior to model how each person evaluates the different options available at the fast-food outlets. They then use this individual-specific model to predict each consumer’s choice under several different proposals aimed at altering consumer caloric consumption behavior.

Using this model to estimate demand, the authors demonstrate that recent proposals to tax soft drinks have little effect on reducing overall caloric consumption in environments in which bundled meals are present. However, it is possible for fast-food outlets to offer bundles and still lower calorie consumption between 10% and 25% with a minimal decrease in profits by (1) changing the drinks sizes offered on the menu and (2) redefining the standard sizes of the soft drink and fries included in the combo meal. For example, if the outlet were to drop the 44-ounce drink from available drink sizes on the menu and reintroduce the 16-ounce to the menu and include it in the bundled meal (rather than a 21-ounce), the average change in the calories associated with soft drinks and fries would decrease by at least 10% without any substantial reduction in firm profits. This reduction could be more than doubled if small fries were also substituted for the standard medium fries.

On the basis on these findings, the authors suggest that it is possible to introduce policies that provide incentives for fast-food outlets to meet specific caloric reductions. Not only would these reductions be “easy” for the outlet to implement without having any major impact on its profits, but it would not restrict consumers’ choices in terms of available items. All that would be required is for the firm to reintroduce smaller sizes to its menu and redefine the content of the bundled meals.

Biography
Kathryn M. Sharpe is Assistant Professor of Business Administration in the Darden Graduate School of Business at the University of Virginia. Her research is centered on subtle contextual effects at fast-food restaurants and in luxury goods markets. Before her academic career, Kathryn worked at Accenture, The Home Depot, and Bain & Company.

Richard Staelin is Edward and Rose Donnell Professor of Business Administration in the Fuqua School of Business at Duke University. Since joining Duke, he has been deputy dean (twice), associate dean of Executive Education, executive director for the Teradata Center for CRM, and the initial managing director of GEMBA. He has published more than 80 articles in academic journals and has received best-paper awards at Journal of Marketing Research, Journal of Marketing, and Marketing Science and the Outstanding Educator award and the Converse award from the American Marketing Association. He was the editor of Marketing Science and the consulting editor for Journal of Marketing’s special issue on customer relationship management. Staelin has served on more 40 PhD committees and is chairman of the Board of Directors for a small biotech firm (BioElectronics). He is an inaugural fellow in ISMS and a fellow in INFORMS. He is currently the past president of INFORMS Society of Marketing Science.

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