How retailer money-back guarantees influence consumer preferences for retailer versus national brands

Retailers often use money-back guarantees to reduce consumer perceived risk about brand quality and to increase their market share. The effect of such guarantees on perceived product quality and ultimately preference and product choice depends on their perceived value and credibility, related to other extrinsic clues, such as price and brand. An analysis of an experimental design with a national sample of consumers shows that compared with a simple money-back guarantee, a double money-back guarantee does not further increase the relative preference for a retailer brand over a national brand. Furthermore, the size of the effect of a money-back guarantee is small, moderated by the effects of other information on product quality, such as the size of the price differential between retailer and national brands. Finally, the effect of a money-back guarantee differs, depending on the customer–retailer relationship: A retailer with high credibility can influence regular customers less by guarantees.