The Effect of Information on Money-Back Guarantees on Brand Attribute Perceptions and Choices in Competitive Markets

Allowing consumer returns via money-back guarantees (MBGs) is a common practice among retailers to encourage consumer purchases. Although the existing literature emphasizes the usefulness of MBGs, little is known about why retailers adopt different return policies and how their bargaining power with the upstream manufacturer impacts their return policies. To gain a better understanding, we examine retailers' MBG decisions with a stylized model. In our model, two retailers with different quality levels first decide whether to implement MBGs, then simultaneously bargain for wholesale prices with a manufacturer, and finally engage in price competition in the retail market. We adopt a multilateral bargaining framework, and we characterize sufficient conditions and explain the economic rationales for all possible equilibrium MBG outcomes. We further study the impact of the retailers' bargaining power on the manufacturer's and retailers' profits, as well as consumer surplus. We find that the retailers' (a)symmetric bargaining powers can lead to (a)symmetric MBG decisions and that the retailer with high bargaining power may refuse to implement an MBG if the manufacturer's reimbursement for the returned product is not large enough. Furthermore, while the manufacturer, the low-quality retailer, and the consumers always benefit from an MBG, the high-quality retailer benefits from an MBG only when his bargaining power is high and the low-quality retailer's bargaining power is low.

Money-back guarantee in the presence of strategic customer behavior

PurposeThe paper aims to develop an alternative valuation model for money‐back guarantees (MBG) using a real‐option approach and examine the validity of the proposed model with an experimental design. This study attempts to address how retailers appropriately price MBG from a consumer value‐based viewpoint.Design/methodology/approachThe study defines the perceived post‐purchase product value as a stochastic underlying process, and then MBG option value could be theoretically determined by the real‐option pricing approach. For the test of the real‐option perspective on MBG, a 2×2×2 factorial experimental design is conducted to examine the empirical effects.FindingsWith model specification, the study investigated the effects of three key factors, i.e. price level, perceived risk level, and consumers' risk‐aversion, which are characterized by a two‐sided effect on MBG option value. The relationships among those factors also are clarified through theoretical analyses. The empirical results could be explained well by the proposed model.Originality/valueFaced with increasingly competitive market, retailers typically need more sophisticated pricing strategies. The study can offer retailers a more comprehensive understanding of consumers' perceived value of MBG in various situations and thereby suggest some management implications for the MBG pricing issue.

Who should be pricing leader in the presence of customer returns?

“Surprise Gift” Purchases: Customer Insights from the Small Electrical Appliances Market

Consumer Acceptance of the Internet as a Channel of Distribution

A holistic understanding of the prospects of financial loss to enhance shopper's trust to search, recommend, speak positive and frequently visit an online shop

We construct two models of the behavior of consumers in an environment where there is uncertainty about brand attributes. In our models, both usage experience and advertising exposure give consumers noisy signals about brand attributes. Consumers use these signals to update their expectations of brand attributes in a Bayesian manner. The two models are (1) a dynamic model with immediate utility maximization, and (2) a dynamic “forward-looking” model in which consumers maximize the expected present value of utility over a planning horizon. Given this theoretical framework, we derive from the Bayesian learning framework how brand choice probabilities depend on past usage experience and advertising exposures. We then form likelihood functions for the models and estimate them on Nielsen scanner data for detergent. We find that the functional forms for experience and advertising effects that we derive from the Bayesian learning framework fit the data very well relative to flexible ad hoc functional forms such as exponential smoothing, and also perform better at out-of-sample prediction. Another finding is that in the context of consumer learning of product attributes, although the forward-looking model fits the data statistically better at conventional significance levels, both models produce similar parameter estimates and policy implications. Our estimates indicate that consumers are risk-averse with respect to variation in brand attributes, which discourages them from buying unfamiliar brands. Using the estimated behavioral models, we perform various scenario evaluations to find how changes in marketing strategy affect brand choice both in the short and long run. A key finding obtained from the policy experiments is that advertising intensity has only weak short run effects, but a strong cumulative effect in the long run. The substantive content of the paper is potentially of interest to academics in marketing, economics and decision sciences, as well as product managers, marketing research managers and analysts interested in studying the effectiveness of marketing mix strategies. Our paper will be of particular interest to those interested in the long run effects of advertising. Note that our estimation strategy requires us to specify explicit behavioral models of consumer choice behavior, derive the implied relationships among choice probabilities, past purchases and marketing mix variables, and then estimate the behavioral parameters of each model. Such an estimation strategy is referred to as “structural” estimation, and econometric models that are based explicitly on the consumer's maximization problem and whose parameters are parameters of the consumers' utility functions or of their constraints are referred to as “structural” models. A key benefit of the structural approach is its potential usefulness for policy evaluation. The parameters of structural models are invariant to policy, that is, they do not change due to a change in the policy. In contrast, the parameters of reduced form brand choice models are, in general, functions of marketing strategy variables (e.g., consumer response to price may depend on pricing policy). As a result, the predictions of reduced form models for the outcomes of policy experiments may be unreliable, because in making the prediction one must assume that the model parameters are unaffected by the policy change. Since the agents in our models choose among many alternative brands, their choice probabilities take the form of higher-order integrals. We employ Monte-Carlo methods to approximate these integrals and estimate our models using simulated maximum likelihood. Estimation of the dynamic forward-looking model also requires that a dynamic programming problem be solved in order to form the likelihood function. For this we use a new approximation method based on simulation and interpolation techniques. These estimation techniques may be of interest to researchers and policy makers in many fields where dynamic choice among discrete alternatives is important, such as marketing, decision sciences, labor and health economics, and industrial organization.

Multi-period job selection: planning work loads to maximize profit

Iran's apparel market is currently filled with foreign brands that are generally ranked as high quality goods with high prices. With a surface examination of the apparel market and customers’ opinions, it can be concluded that Iranian apparel, despite having lower prices, is not in a suitable status in comparison with its foreign counterparts. Accordingly, the purpose of this paper is to explore the impact of individual characteristics and brand-specific features, and finally design a model of consumer purchase behavior towards domestic brands of sports apparel that are available in the Iran market. The method of this study is descriptive-correlational and in terms of the aim, is applicable. The statistical population of the study consisted of sports experts. 141 individuals as sample size were studied out of 220 individuals of the population. A questionnaire used by Kumar, Kim, and Pelton (2009) was also used to collect the data, and the validity of the model and the relationship between the studied variables was supported by the techniques of structural equation modeling. The research findings showed that self-concept of individuals has no role in their orientation towards domestic brands of sports apparel, but need for uniqueness was effective on individual’s orientation towards brand. On the other hand, brand orientation also had positive impact on both emotional value and perceived quality of domestic brands of sports apparel. Also, according to the findings, increasing brand orientation did not increase their purchase intention. All the dimensions of brand in this study, both perceived quality and emotional value had significant positive impact on consumer’s purchase intention towards domestic brands of sports apparel.

The common view of brand choice in consumer marketing is that brands compete against each other within a specified product category. For example, different coffee brands are compared and evaluated by consumers and the most preferred brand is selected. Is this the only adequate way of demonstrating how consumers make brand choices?This thesis challenges the common view on brand choice and brand choice determinants in consumer markets on several accounts. First, brand choice is made in goal-derived categories (e.g., foods to eat while on a diet), and research on goal-derived categories and consumption goals suggests that consumers often choose between brands from different product categories. For example, a consumer may choose between brands of coffee, tea, and soft drinks to fulfill a consumption goal. Second, there is the question of complementarity. Are brands always chosen one by one? We argue in this thesis that consumers often choose brand constellations from complementary product categories in goal-derived categories (e.g., hamburgers and soft drinks when on a short lunch break). The thesis consists of four articles based on empirical studies. The articles cover single-brand choice and brand constellation choice in goal-derived categories, and the use of goal-derived categories by marketing practitioners. The general conclusion is that consumers evaluate more aspects than just brand-related ones when they choose brands in goal-derived categories. Product category associations (i.e., how typical a product category is perceived in a goal-derived category) are a more important determinant of brand (constellation) choice than brand associations. Also, in brand constellation choice, complementarity (i.e., perceived fit between brands) is more strongly related to brand choice than attitude towards individual brands.

Attracting and retaining professionals with the potential to become leaders is crucial for ensuring the success of companies. The purpose of this study is to contribute to the field of employer branding (EB) by identifying which employer brand attributes are perceived as particularly relevant for attracting talented people. Using three empirical studies, we identify brand attributes that have not been very widely diffused among real companies (versus ideal) but are relevant for attracting young professionals with the potential to become leaders. We also identify which brand attributes already present among real employees allow for attracting talented individuals versus the non-talented ones. The three studies are conducted with a sample of 493, 729 and 1605 recent graduates from Italian universities, respectively. The results indicate that the most idealized brand attributes are related to the future employers’ ability to innovate, be committed to social responsibility, be open, be a corporation that values capabilities and knowledge and, finally, be a place offering different career paths. The last three factors in particular have become more important in recent years. The results are discussed with reference to how they contribute to our understanding of EB, brand management and the attraction of future leaders.

In this research the researchers tried to study the brand positioning of Moustache, an entry level denim wear brand from Kolkata. Around 22 branding dimensions were studied in a Likert scale with a total of 109 parameters which resulted in extracting out some important factors, through exploratory factor analysis which influenced the decisions of the consumers in terms of their brand choice. The factors extracted were, namely, Brand Loyalty, Brand Satisfaction, Brand Renown-ability, Brand Knowledge, Brand Promise, Brand Performance and Brand Assurance. All these factors in totality help to shape the position of the brand in the minds of the consumers. These factors collectively explain 60.789% of reasons dictating the branding strategies which affect the purchase behaviour of the consumers of Moustache. A perceptual mapping, through multi-dimensional scaling, of the brand along with its competitors, namely, Mufti, Hoffmen and Passport were done in order to determine how the well the brand is perceived by its consumers in its segment. It was seen that among all the consumers, Moustache was perceived as a brand which has very low perception in Product Innovativeness and Product Promotion. Lastly all the responses of the consumers of the Likert scale was subjected to a mean score analysis in order to understand the mean agreement or disagreement of each branding dimension with respect to the Moustache brand in the mind. It was seen that around 7 branding dimensions namely, Brand Love, Behavioural Commitment, Brand Respect, Action Loyalty, Cognitive Loyalty, Affective Loyalty and Brand Symbolism were the dimensions which according to the consumers, Moustache was lagging behind as compared to its competitors. This research shall help in a better understanding of the denim jeans brand market and shall help further researchers and organisations based out of Kolkata to work upon these characteristics before launching their brand or product with respect to the brand Moustache.

PRACTITIONER APPLICATION: New Factors in the Antitrust Regulation of Hospital Mergers

Common institutional ownership and the erosion of competition in the American health insurance market: A quantitative analysis.