Influencing Customers and Product Returns
Abstract:
Digital platforms expose customers to product fit uncertainty, which may intimidate online purchases. As a result, firms may encourage online order through influence tools such as promotional reviews and influencer posts, which can be skewed in favor of a purchase. However, customers who have ordered due to such influence can ultimately return the product. In this paper, we study how a firm’s ability to influence customers may intertwine with its refund policy. We find that if no refund is offered, a firm will adopt an influence tool when the prior belief of a match is moderate, and the cost of influence is low. More generous refunds may either cease the influence or invite more aggressive influence actions. We then characterize the optimal joint configuration for refund and influence. When the firm can only choose between a full- and no-refund policy, the use of influence tools can be encroached upon by a full refund even if it is costless. Interestingly, the firm will not engage in influencing customers when it can tailor partial refunds. Thus, influencing customers is useful when the firm needs to maintain a naïve or common refund policy across a variety of products. Lastly, we find that allowing returns may lead to a win-win when the decision space for the refund policy is limited and the prior belief of misfit is high.
About Xiao Huang:
Xiao Huang is Professor and the Concordia University Research Chair in Operations & Technology at the John Molson School of Business, Concordia University. Her research focuses on strategic interactions among supply chain members as well as data-driven and behavioural-driven decision-makings in supply chains. Her work has appeared in leading journals such as Management Science, Manufacturing & Service Operations Management, Production and Operations Management, Marketing Science, and the European Journal of Operational Research. Dr. Huang also publishes practitioner articles and business cases and teaches a wide variety of courses at all levels, including operations management, business process management, sourcing and logistics, revenue management, and data analytics. She was a visiting professor at McGill University, the University of Colorado, Boulder, and the University of Rennes I. Dr. Huang is currently on the editorial review board of Production and Operations Management.
Language: English
This is a free seminar. Registration is mandatory.
Supported by the Luxembourg National
Research Fund (FNR) 17931929