Durable Product Purchase Decisions: Influences of Retailer Warranty Extension Information Sequencing

51 Pages Posted: 7 May 2014

See all articles by Michael Steiner

Michael Steiner

University Witten/Herdecke

Thomas Otter

Goethe University Frankfurt - Department of Marketing

Date Written: May 5, 2014

Abstract

This research investigates two popular ways retailers provide information about the availability and the characteristics of retailer-backed warranty extensions to consumers. With a sequential strategy, retailers draw customers' attention to an extended warranty offer only after the customers have chosen specific versions or brands of a durable product. A simultaneous strategy instead provides information about durable products and extended warranties together, prompting customers to consider the extended warranty offer while making their product choice. The warranty extensions on durable products often provide higher margins, so retailers seek to boost the sales of these warranty extensions. This experimental study uses laptop computers as the focal product category to compare the effects of sequential and simultaneous information on customer decision making. The total value of purchases consistently increases when information about durable products and extended warranties appears sequentially. These results imply that retailers can increase revenues merely by providing information sequentially instead of simultaneously.

Keywords: add-ons, sales strategy, mental budgeting, context-dependent preferences, sequential decision making, myopic consumer behavior

JEL Classification: M39, D11, C11

Suggested Citation

Steiner, Michael and Otter, Thomas, Durable Product Purchase Decisions: Influences of Retailer Warranty Extension Information Sequencing (May 5, 2014). Available at SSRN: https://ssrn.com/abstract=2433458 or http://dx.doi.org/10.2139/ssrn.2433458

Michael Steiner (Contact Author)

University Witten/Herdecke ( email )

Alfred-Herrhausen-Stra├če 50
Witten, D-58448
Germany

HOME PAGE: http://https://www.uni-wh.de/wirtschaft/lehrstuhl-marketing/

Thomas Otter

Goethe University Frankfurt - Department of Marketing ( email )

Frankfurt
Germany
++49.69.798.34646 (Phone)

HOME PAGE: http://www.marketing.uni-frankfurt.de/index.php?id=97?&L=1

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