Electronic word of mouth (eWOM) delivered by customer reviews, critical for online retail startups, is positively impacted by a more lenient merchandise return policy (MRP), FIU Business research found.
Received by buyers as a reward, this leniency drives them to leave positive, detailed reviews about the products and their shopping experience, the study found. Researchers describe it as returning the favor for receiving a benefit.
"Standing out among other products has become increasingly difficult," said Sebastian Garcia-Dastugue, assistant professor of marketing and logistics at FIU Business and one of the researchers. "One of the key factors that help brands do this at the point of sale online are the reviews from clients."
Forthcoming in the Journal of Business Logistics, the research analyzed the relationship between an item's MRP at the point of sale in terms of days allowed for returning a purchased item and the review that said sale elicits from the buyer.
"Returns are normally part of the transaction, and this is even more important in an online transaction because the buyer has no contact with the actual product at the time of purchase," said Garcia-Dastugue. "The principal mechanism available to eliminate any risk is the return policy."
Researchers tracked toy sales at a small online retailer between January 1, 2018 and December 31, 2018. The company sells its products on various platforms - including Amazon, Etsy, and eBay - plus its own independent website. During this period, certain sales were made under conditions of more lenient MRP. A total of 3,949 usable sales were examined, of which 529 delivered a review.
Each transaction was examined to determine if the product was returned, the quality of the review – number of words and whether the tone of the message was positive or negative. Researchers also looked at the date of purchase, the MRP and the time between purchase and return.
Garcia-Dastugue explained that results indicated that a more lenient MRP was associated with an increased likelihood of buyers writing a review, providing a more positive rating, and when writing a review expending more effort to writing a deeper, more detailed review.
"Some reviews are increasingly important at the time of purchase because they become an element to help make the final decision to buy or not," Garcia-Dastugue said. "That shows they’ve become super important."
Can too long be too much?
While there’s increased likelihood of customers writing a review, and one that is useful, due to a lenient MRP, researchers found that an excessively long period will not generate more or better reviews.
"If extending the MRP represents a cost and doesn’t increase the propensity for reviews you keep the shorter window,” said Garcia-Dastugue. "If it’s 30- 45- or 90-days you can modify it as the market evolves."
Garcia-Dastugue conducted the research with Rahul Nilakantan of Georgia Southern University, Carl Marcus Wallenburg of WHU - Otto Beisheim School of Management, and Shashank Rao of Auburn University.