Understanding Money-Back Guarantees: Cognitive, Affective, and Behavioral Outcomes Thomas Suwelack a,∗ , Jens Hogreve b,1 , Wayne D. Hoyer c,2 b
Institute of Marketing, University of Muenster, Am Stadtgraben 13 - 15, 48143 Muenster, Germany Catholic University of Eichstaett-Ingolstadt, Ingolstadt School of Management, Chair of Service Management, Auf der Schanz 49, 85049 Ingolstadt, Germany c Department of Marketing- B6700, McCombs School of Business, The University of Texas at Austin, Austin, TX 78733, United States
Abstract Although money-back guarantees (MBGs) have a long tradition in marketing and retailing practice, a deeper understanding of how consumers value this instrument is still lacking. The results of two experimental studies show that in addition to cognitive effects, MBGs evoke a positive emotional response, thereby increasing consumers’ purchase intentions and willingness to pay a price premium. Moreover, MBGs positively affect consumers’ responses for search and experience goods, although for experience goods, MBGs should be designed with stricter return conditions as compared to MBGs for search goods. The results should help retail managers understand the consumer impact of MBGs, as well as assist them in pricing guaranteed items and designing effective MBGs according to the type of product. © 2011 New York University. Published by Elsevier Inc. All rights reserved. Keywords: Money-back guarantee; Risk perceptions; Emotions; Willingness to pay a price premium; Search and experience goods
Introduction By offering a money-back guarantee (MBG), a seller promises that any customer who is not satisﬁed with a purchase can return the item within a certain period and receive a full refund (Davis, Gerstner, & Hagerty 1995). In response to intense competitive forces in business environments, especially during the recent recession, MBGs have been widely implemented by retailers and manufacturers as a promotional tool to gain consumers’ attention and positively inﬂuence their purchase decisions (Sullivan 2009). Thus, ﬁrms are increasingly taking advantage of MBGs, even though empirical investigations about MBG outcomes on consumer behavior remain insufﬁcient (d’Astous and Guèvremont 2008). Several authors argue that MBGs serve as extrinsic cues of quality (e.g., Moorthy & Srinivasan 1995; Shieh 1996), reduce consumers’ perceived risk (Grewal et al. 2003; Heiman, McWilliams, & Zilberman 2001; Lei, de Ruyter, & Wetzels ∗
Corresponding author. Tel.: +49 251 83 25 027. E-mail addresses: email@example.com (T. Suwelack), Jens.Hogreve@ku-eichstaett.de (J. Hogreve), firstname.lastname@example.org (W.D. Hoyer). 1 Tel.: +49 841 937 1861; fax: +49 841 937 2976. 2 Tel.: +1 512 471 1128.
2008), increase consumer satisfaction (e.g., McCollough & Gremler 2004), and enhance purchase intentions (e.g., Davis et al. 1995; Wood 2001). Yet despite these various effects analyzed in previous research, important gaps in literature remain. In response, this article offers four contributions to retailing and marketing literature. First, we extend previous research on MBGs that has focused on cognitive variables such as quality or risk perceptions, by examining their impact on affective outcomes. We therefore respond to Chandon, Wansink, and Laurent (2000) claim that promotions offer both utilitarian and hedonic beneﬁts. Furthermore, investigating emotions is important because cognitive models only provide partial explanations for responses to promotions (Erevelles 1998), and affective inﬂuences appear more important than previously believed (e.g., Bagozzi, Gopinath, & Nyer 1999), especially for retailing (Puccinelli et al. 2009). To begin exploring the role of emotions in an MBG context, we restrict our investigation to one negative and one positive emotion that could both mediate MBG effects on important consumer outcomes. Speciﬁcally, the focus is on anticipated regret...