Relationship between retailers’ return policies and consumer ratings

Purpose: Return policies are major risk-allaying cues for customers, yet they are a critical cost/lost-sales for retailers. Despite their importance in the retailing industry, few studies have examined the interplay of return policies with other cues that customers use to make a purchase decision. Toward this end, this study aims to investigate the interaction effects certain salient high-scope and low-scope cues, such as consumer ratings and brand image, and retailers’ return policies have on consumer purchase decisions. Design/methodology/approach: Building on literature from signaling theory and cue scope literature (high-scope and low-scope cues), the authors develop a research model that hypothesizes the interrelationships between return policies, price discounts, customer product ratings and brand image. Three experimental studies investigate the potential interplay between return policies (lenient vs stringent), price discounts (low vs high), customer product ratings (low vs high) and brand image (high vs low) on quality certainty perceptions and purchase intentions. The mediating effect of quality certainty perceptions on the interplay of various factors (return policy, price promotions, consumer ratings and brand image) and customer purchase intentions is also investigated. Findings: Results indicate that a lenient return policy will have a positive effect when consumers encounter high scope cues that signal undesirable aspects of the product (i.e. low consumer ratings, low brand image). In contrast, when high scope cues signal desirable aspects of the product (i.e. high consumer ratings, high brand image), it attenuates the effects of return policy. The findings suggest that quality certainty acts as a psychological process. Research limitations/implications: Service researchers should seek to examine the role of return policies in a more comprehensive manner. Practical implications: Return policies are important cues for consumers while making purchase decision. Thus, retailers need to realize that these policies may need to be more dynamic or tiered, rather than one-size-fits-all. Originality/value: This study provides a more comprehensive view of how consumers consider multiple cues simultaneously in decision-making. Literature has mainly examined the interactions between different high-scope and low-scope cues, but there has been limited research directed toward the interplay between multiple high-scope cues.