Promises,Promises: How Consumers Respond to Warranties in Internet Retailing

Past studies have shown that perceived risk is a critical determinant of purchase intention in non–store retailing contexts, including Internet retailing. Extant literature in physical retailing suggests that warranties can be a significant variable in reducing consumers’ perceived risk. We examine the role of Web site warranties in risk reduction and how warranty information interacts with retailer reputation and brand name as two other risk relievers in an online shopping environment. Results suggest that warranties can make a positive difference for online retailers with strong reputations with respect to perceived risk, perceived product quality, and purchase intentions. However, consumers are less influenced by warranty information when dealing with online retailers with weak reputations. For the other extrinsic cue, however, we find that warranty information does not have an effect when dealing with brand names, suggesting that a brand name’s impact on online risk reduction remains regardless of the presence of warranty information.     

New patterns of consumer protection under warranty law: Lessons from the U.S. magnuson-moss warranty act

Warranty law appears to be a relevant instrument for granting protection to consumers against product disappointment. However, empirical studies concerning some warranty markets both in the United States and in West-European countries show that there continues to be no bargaining on warranties between sellers and buyers, that the most serious risks are all allocated to the user of the product, and that consumers are generally not granted an actual opportunity of challenging a breach of warranty and getting adequate compensation for losses sustained. The Magnuson-Moss Warranty-Federal Trade Commission Improvement Act which was enacted in the United States in 1975 constitutes a first comprehensive and consumer-oriented reform of traditional warranty law. It foresees new patterns of consumer protection under warranty statutes, combining warranty substance regulation with warranty information, administration, and litigation procedures. This paper first describes the Act's major provisions; it also points out some of its deficiencies. Although criticisms are formulated against the Act's ideology or basic assumptions, it is the author's opinion that it represents a decisive step towards legislative and administrative participation in the formulation of warranties. The Act undoubtedly suggests some, though not identical, avenues of reform that legislators and authorities of European countries and confederations should now propose in order to increase consumer protection against defective or unsatisfying products.     

The asymmetric effect of warranty payments on firm value: The moderating role of advertising,R&D,and industry concentration

Changes in firms’ warranty payments are informative signals that enable investors to form timely expectations about potential changes in product quality. The authors’ survey shows that warranty payments affect potential investors’ product quality assessments and stock investment likelihood. Their quantitative analysis reveals an asymmetric stock market reaction: unanticipated increases in warranty payments (which signal quality “losses”) lower stock returns but unanticipated decreases do not affect stock returns. Two important factors moderate this relationship. First, boosting advertising spending attenuates the negative stock return effect of unanticipated increases in warranty payments. Second, unanticipated decreases in warranty payments, which signal quality “gains”, translate into higher stock returns when the industry has become less concentrated. Interestingly, changes in R&D spending do not moderate investors’ response to unanticipated increases or decreases in warranty payments. The authors advise firms to use advertising to lessen the harm from warranty payment increases and to strongly communicate warranty payment decreases in the face of intensified competition. The authors also caution that offering warranties in general does not ensure greater firm value as declining quality firms that myopically offer warranty programs experience lower firm value than those that do not provide warranties.     

THE IMPACT OF ORDER FULFILLMENT SERVICE ON RETAILER MERCHANDISING DECISIONS IN THE CONSUMER DURABLES INDUSTRY

Historically, manufacturers held the upper hand in consumer goods supply chain relationships. There has been a pervasive shift of power to retailers over the past 20 years, however, ushering in an era of waning consumer loyalty to manufacturers' brands and increasing loyalty to retailers. While there is extensive research focusing on the manufacturer‐consumer relationship, retailers' increased ability to influence consumer purchases suggests that manufacturers should understand not only consumer perceptions of delivery service, but also retailer perceptions. We incorporate social network theory to examine the manufacturer‐retailer‐consumer linkages in the consumer durables industry, with the emphasis on the retailer in the role of the “broker” (Burt 1992). Specifically, we examine whether retailer perceptions of a manufacturer's order fulfillment service (OFS) positively impacts retailer perceptions of the manufacturer's brand, the importance of the product, and the likelihood of the retailers' salespeople to recommend the product to consumers. The research bridges OFS and retailer purchase behavior in a consumer durables industry characterized by high levels of consumer involvement, brand presence, and personal selling.     

Expertise Makes Perfect: How the Variance of a Reviewer's Historical Ratings Influences the Persuasiveness of Online Reviews

Online reviews have become an important source of information for consumers’ purchase decisions. Drawing upon the consumer expertise and persuasion literature, this study proposes that consumers are more willing to accept a reviewer's recommendation when his/her historical ratings in a certain product domain display greater variance. Five experiments provide consistent support for this hypothesis and the underlying process. Study 1 tests the proposed effect of a reviewer's rating variance on consumers’ willingness to accept the reviewer's recommendation. Studies 2 and 3 show that this effect can be attributed to perceptions regarding the reviewer's expertise. Moreover, this “variance-expert inference” effect is attenuated when the consumption experience of the reviewer is limited (Study 4) and when the consumers are familiar with the products (Study 5). The theoretical implications for the online review and persuasion literature and practical implications for online retailers are discussed.     

Determinants for Effects of Celebrity Negative Information: When to Terminate a Relationship with a Celebrity Endorser in Trouble?

This study examines three factors that influence consumers’ brand evaluation and purchase intention under negative celebrity information. The study is designed to investigate the effects of consumers’ perceived associative strength between celebrity endorser and brand, the role of congruence between a celebrity endorser's negative information and his/her endorsed brand, and the effects of consumers’ level of brand commitment. The study's findings suggest that congruence or “fit” between a celebrity endorser's negative information and an endorsed brand moderates a consumers’ evaluation of brand and purchase intentions. The study finds that a strong associative link between the brand and the celebrity endorser leads to lower brand evaluation as well as lower purchase intention. It also finds that consumers with a higher level of brand commitment are less likely to react negatively to a celebrity's bad publicity than are consumers with a lower level of brand commitment. Theoretical and practical implications are discussed.     

Extended Warranties: Consumer and Manufacturer Perceptions

Extended warranties are becoming increasingly popular, both among consumers and manufacturers. In this study, consumer and manufacturer perceptions of why extended warranties are bought and sold are evaluated and compared. The results indicate that consumers seem to view extended warranties as a way of reducing perceived risk. Manufacturers reveal that they market extended warranties both to generate revenue and to provide service to customers. Marketing management and public policy implications are examined and research directions identified.     

Warranty as a Signal of Quality: The Moderating Effect of Consumer Knowledge on Quality Evaluations

Prior research has shown that consumers use warranties as a signal of quality. This article explores whether prior knowledge moderates consumers' utilization of warranty information in evaluating product quality. In particular, we examine how prior knowledge impacts the relative use of warranty information when consumers are already aware of firm reputation. Indeed, we find that the extent to which warranty information is used in quality evaluations varies with prior knowledge. We report the results of two experiments, which somewhat surprisingly suggest that, for experts, a better warranty leads to perceptions of higher quality, regardless of firm reputation. Novices on the other hand, tend to perceive a better warranty as a signal of higher quality only when the firm is reputable but not when its reputation is low.     

The effects of product knowledge on the evaluation of warranteed brands

This study explores the effects of consumer knowledge on respondents' evaluations of both known and unknown brands that include either a 2-year or a 20-year warranty. Both experts and nonexperts evaluated warranty as more important than brand name in their product quality decision. Warranty length was positively correlated with product quality perceptions for both known and unknown brands. With the unknown brand, nonexperts perceived significant improvement in product quality when the warranty length was increased from 2 to 20 years. For the known brand, nonexperts perceived little difference in quality for the two warranty lengths. Experts indicated no significant differences in perceived quality, given the four brand/warranty-length conditions. The results indicate that warranty length is most heavily weighted as a cue to product quality when consumers are not highly knowledgeable, and the brand name is not well known. © 1996 John Wiley & Sons, Inc.     

College—Age Consumers' Knowledge and Perceptions of Food Irradiation

Abstract

This paper explores consumers of 18—24 years of age and their perceptions of irradiated ground beef products and role of irradiation on their purchase decisions. Data was collected with a survey of college—age consumers. Results showed that the majority of participants would be willing to purchase irradiated food products. Participants were somewhat concerned about impact of irradiation on safety and taste. The term “irradiated” and cost to consumer had a negative impact on participants' willingness to purchase irradiated ground beef products. The identification of the attributes should provide a useful guidance for the beef industry in terms of determining marketing strategies to increase the level of this segment of the consumer groups’ preference for irradiated products.     

The influence of sharing versus self-use on the preference for different types of promotional offers

Sharing, which refers to giving something you have to someone else, is one of the most ubiquitous forms of human behavior in the world. Everyone experiences it in various situations, including buying food. Nonetheless, although buying something to share with others is quite common in our daily lives, most consumer research on buying focuses on the condition of “self-use” rather than “sharing.” The main purpose of this study is to investigate the influence of promotional offers on consumers' purchase decisions when buying food for self-use/sharing with others. The authors conducted four experiments to answer the main research questions. The results indicated that consumers prefer “price discounts” over “bonus packs” when the shopping task relates to self-use due to their concern about “loss reduction.” In contrast, they prefer bonus packs over price discounts when the shopping task relates to sharing with others because of their focus on “extra gains.” In addition, consumers’ perceived responsibility is a moderator. When perceived responsibility is low and the purchase is for self-use (sharing with others), price discounts (bonus pack) are favored over bonus packs (price discounts). However, when perceived responsibility is high, consumer preference to promotional offers are not significant different either in self-use or sharing with others condition. It seems that role of responsibility is influential when the shopping task relates to self-use. This study not only contributes to a deeper understanding of consumer psychology but will also be beneficial to practitioners in designing effective promotional strategies that consider motives for food shopping.     

An Examination of Participation in Homebuyer Education and Counseling Services

Homebuyer education and counseling aims to help potential homebuyers understand benefits and risks of homeownership, choose a home and an appropriate mortgage, and build the financial know‐how needed for sustainable homeownership and financial health. U.S. Department of Housing and Urban Development's (HUD's) First‐Time Homebuyer Education and Counseling Demonstration found that women and individuals with greater education were generally more likely to participate in services. Enrollees referred to in‐person services are more likely to participate if they are early in the homebuying process or if they planned to purchase a home without a coborrower. They may perceive benefits of services to outweigh the costs of scheduling, traveling to, and attending in‐person services. Enrollees offered remote services (phone, online) are more likely to participate if they are “better off,” having higher mortgage literacy and credit scores. Results may inform agencies' messaging, outreach, and approach to providing services and meeting consumers' needs, federal policy, and interpretation of future impact estimates.     

Should companies hope instead? The role of verbal cues in consumers' evaluation of cause-related marketing (CRM)

Companies engaged in cause-related marketing (CRM) must demonstrate sincere commitment to gain consumer support. In this paper, we observe that consumers infer companies' commitment to the cause by the language used in the CRM promotional material. In a series of experiments, we compare the popular expression “we can make a difference” to “we hope to make a difference” in influencing consumers' response to the CRM. When consumers question company's motives—which can happen, for instance, when they do not perceive a congruency between the company and the supported cause (low firm/cause fit)—consumers seem to perceive the company to be less committed to the cause when the company says they “can” make a difference rather than “hope” to make a difference. Our conclusions offer implications for CRM by highlighting the importance of the words used and their semantic nuances to correctly reflect the company's motivations and thus communicate effectively.     

Understanding the factors affecting consumers’ behaviour when purchasing refurbished products: A chaordic perspective

This paper seeks to develop an integrated conceptual framework to explain the conditions that lead to consumers' behaviour when purchasing refurbished products. Innovative methodology was used, including “fuzzy-set qualitative comparative analysis” (FsQCA), to explore the factors affecting consumers’ behaviour in this regard. Data gathered from 472 consumers were used to test the suggested model. The results revealed that ethical constructs (i.e., “moral obligation, moral accountability, moral outrage”), threat and coping appraisal variables (i.e., perceived severity, perceived venerability), and value are key drivers of the purchase of refurbished products. The findings also revealed that moral obligation, moral outrage, perceived venerability, egoistic value, and attitude are necessary to stimulate purchase behaviour, while perceived severity, rewards, perceived cost, and altruistic value, although sufficient, are not in themselves necessary. This study offers useful implications for retailers, and re-manufacturers, which may help to enhance their marketing strategies and policies.     

The Eyes Have It: How a Car's Face Influences Consumer Categorization and Evaluation of Product Line Extensions

This research focuses on a previously unexamined risk associated with the widely used new product development strategy of line extensions. Specifically, it explores consumer reactions when line extensions become too visually similar and examines both short‐term and longer term strategies for solving the problem. Examined in the context of consumer durables, specifically, automobiles, the results show that consumers who make categorization mistakes when trying to distinguish between two visually similar product lines have more negative attitudes not only toward the product but also toward the parent brand. The results of Study 1 confirm that providing a design vocabulary that articulates the car's design features is effective in reducing consumer's categorization mistakes. In addition, results of Study 2 indicate that changes to the car's “eyes” (headlights) are more effective than changes to the car's “mouth” (grille) in helping consumers to differentiate among cars in the line.     

Examining the effect of flow experience on online purchase: A novel approach to the flow theory based on hedonic and utilitarian value

The literature indicate that when flow is approached as unidimensional, its effects on online purchase intention are always positively significant, however the results of the studies where the flow is approached as a multidimensional level, is far from indicating a general tendency. The inconsistent results appeared in the literature are regarded as a result of overlooking both the utilitarian and hedonic significance of research context and the hedonic and utilitarian characteristics of the flow's sub-dimensions. In this direction, the effects of flow on online purchase intention are examined upon consideration of those two factors. Research's data were gathered via e-mail survey from an online shopping website's database. A total of 490 samples obtained in this study were analyzed with structural equation modeling. The results indicates that the flow's most valuable antecedent is feedback in the context of online purchase. The dimensions of “enjoyment”, “perceived control” and “merging of action and awareness” has positive and time distortion has negative significant effects on online purchase intention. However, no significant effects of the concentration and curiosity on online purchase intention were determined.     

An empirical analysis of factors that influence retail website visit types

Consumers may have a variety of reasons for using a retail brand's website, including browsing, purchasing, or browsing followed by purchasing. In this study we examine visits to three different retail websites to develop a typology of website visit behaviors and reveal factors that are associated with each visit type. We find four visit types that are consistent across all brands, which we label “touching base,” “search/deliberation,” “goal-directed,” and online shopping “cart-only” visits. One of the brands has an additional visit type we term “considered visits.” The type of visit a consumer makes is influenced by a combination of marketing channels, and their visit and purchase history with the brand. For example, shoppers that are directed to a retailer's website by clicking on a search engine link (paid or organic) are more likely to make visits that are associated with a purchase goal, while visits generated by an email are more likely to be just touching base. These findings provide marketers with a more refined understanding of the different ways consumers use their websites, and the factors associated with these visit behaviors.     

Effects of Lightness‐Location Congruency on Consumers’ Purchase Decision‐Making

A considerable body of psychological and neuroscientific research has demonstrated the existence of robust sensory correspondences between various features, attributes, or dimensions of experience in different sensory modalities. Despite findings indicating the importance of sensory correspondences to human information processing, research on purchase decision‐making has not to date focused sufficiently on this phenomenon. The present study examines how the lightness of packaging colors, and the location of products on a display shelf interact to affect consumers’ purchase decision‐making via perceived visual heaviness. As predicted, a display with light (dark) colored products positioned in the upper (lower) shelf positions increases shoppers’ perceptual fluency and facilitates their visual search, thus leading to the suggestion that “light” (heavy) locations are most appropriate for light (dark) colored products. Moreover, the lightness‐location congruent display is shown to influence people's choice behavior positively as well. This research also demonstrates that when consumers consider the lightness (in terms of their weight) of the products, they are more likely to choose light (vs. dark) colored products located in the upper shelf positions. These results therefore demonstrate that consumers’ purchase decision‐making may be promoted by in‐store environments designed to be congruent with their sensory correspondences.     

Cutting Through the Online Review Jungle — Investigating Selective eWOM Processing

Consumers frequently rely on online reviews, a prominent form of electronic word-of-mouth (eWOM), before making a purchase decision. However, consumers are usually confronted with hundreds of reviews for a single product or service, as well as rich information cues on online review websites (review texts, helpfulness ratings, author information, etc.). In turn, consumers face more information cues on online review websites than they can or want to process, and are likely to proceed selectively. This paper investigates selective processing of such eWOM information cues. Results of Study 1, an exploratory study using verbal protocols, confirm that consumers display selective eWOM processing patterns and are able to articulate them. Study 2 develops and applies a measurement instrument to capture these patterns. A subsequent cluster analysis on members of a large-scale online panel (N = 2,295) indicates five prominent eWOM processing types, termed “The Efficients”, “The Meticulous”, “The Quality-Evaluators”, “The Cautious Critics”, and “The Swift Pessimists”. Insights of this research can help firms to better understand consumers' eWOM processing and improve the user-friendliness of online review websites.     

Plausible versus implausible tensile price claim: Selective accessibility model approach

Retailers frequently use exaggerated price discount advertisements with a tensile price claim (TPC; e.g., “Save up to 70%”) to attract consumers because they expect that once consumers enter a store, they will purchase low‐ or medium‐discounted products. Drawing on the selective accessibility model, this study investigated the way in which an implausibly high maximum level of savings stated in a TPC influences consumers’ expected price discount (EPD) and perceptions of actual price discounts across different types of TPCs (i.e., TPC stating a maximum level and TPC stating a range of savings). This study also investigated two situations in which consumers have previous knowledge of a product’s price discount versus when they have less or no knowledge of the discount. For both conditions, a single‐anchor TPC (i.e., “Save up to Y%”) that stated an implausible maximum level of savings led to a higher EPD and lower perceptions of the deal (i.e., perceived savings, price fairness, and perceived value) with respect to the actual price discount than did a TPC with a plausible maximum level of savings. In contrast, when the TPC stated two anchors (i.e., “Save X–Y%”) and consumers had knowledge of the price discount, their EPDs assimilated only toward the plausible anchor (X), and ignored the implausibly high maximum price discount (Y), resulting in a lower EPD and higher perceptions of the deal of the actual price discounts than a TPC that stated a plausibly high maximum level of savings. In contrast, when consumers had no knowledge of the price discount, their EPDs only adjusted toward the more plausible anchor (X), regardless of whether they perceived the maximum anchor as plausible or implausible. Thus, there was no difference in consumers’ perceptions of “Save X–Y%” between implausibly and plausibly high Y%.