Understanding Money-Back Guarantees Cognitive Affective

Journal of Retailing 87 (4, 2011) 462–478

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

a

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

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