Product returns are a costly problem for online retailers. In fact, the average return rate for online orders is 30%, and it can be even higher for certain product categories, such as apparel. There are a number of factors that can contribute to product returns, such as inaccurate product descriptions, damaged products, and simply buyer's remorse. However, a recent study by researchers at New York University has found that marketing instruments can also play a role in increasing product returns.
The study, which was published in the Journal of Retailing, examined the impact of a variety of marketing instruments on product returns, including newsletters, catalogs, coupons, free shipping, paid search, affiliate advertising, and image advertising. The researchers found that none of the marketing instruments decreased returns. In fact, some of the instruments, such as paid search and free shipping, actually increased returns by up to 18%.
The researchers believe that the reason why marketing instruments can increase product returns is because they can lead to consumers having unrealistic expectations about the products they are purchasing. For example, a consumer who sees a product advertised on a free shipping promotion may be more likely to purchase the product without fully considering whether it is the right product for them. This can lead to the consumer returning the product after they have received it and tried it on.
The researchers also found that the effects of marketing instruments on product returns can be moderated by product category. For example, free shipping and paid search were more likely to increase returns for fashion products, where consumers have a higher degree of uncertainty about the expected value of the product. In contrast, newsletters and catalogs were more likely to increase returns for non-fashion products.
The findings of this study have important implications for online retailers. Retailers need to be aware of the potential for marketing instruments to increase product returns. They should carefully consider the use of marketing instruments that have been shown to increase returns, such as paid search and free shipping. Retailers may also want to consider using marketing instruments that have been shown to reduce returns, such as newsletters and catalogs.
Literature Review
Product returns are a costly problem for retailers. In the United States, the average return rate for online orders is 30%, and it can be even higher for certain product categories, such as apparel. There has been a growing body of research on the factors that influence product returns. This research has focused on a variety of factors, including customer characteristics, product characteristics, and return policy components.
However, there has been relatively little research on the relationship between marketing instruments and product returns. The few studies that have been conducted in this area have found that some marketing instruments, such as free shipping, can increase product returns.
Table 1 provides an overview of some of the key studies that have linked firms' marketing instruments to product returns.
The table shows that there have been a variety of studies that have examined the relationship between firms' marketing instruments and product returns. The results of these studies have been mixed, but some consistent findings have emerged. For example, several studies have found that free shipping can increase product returns. Additionally, some studies have found that the effects of marketing instruments on product returns can be moderated by product category. The content of the passage provides a more detailed overview of some of the key studies that have been conducted in this area. The passage discusses the study by Bechwati and Siegal (2005), which found that when customers were presented with a sequential brand display, they were more likely to return the product after they had purchased it. This is because the sequential brand display created a higher expectation of the product, which was not met after the product was purchased.
The passage also discusses the study by Petersen and Kumar (2009), which found that return rates increase when customers try new product categories and decrease when products are on sale or purchased as gifts. The passage also notes that the effects of marketing instruments on product returns can be moderated by product category.
Conceptualization
When making a purchase online, customers use the available information to form expectations about the product's true value. Marketing instruments that provide monetary benefits, such as coupons and free shipping, will increase both expected and experienced product value. Marketing instruments that provide information, but no monetary benefits, such as newsletters and catalogs, can have a twofold effect on expected value. On the one hand, they provide additional information to customers and thus reduce pre-purchase customer uncertainty. On the other hand, they increase expectations.
The overall effect of newsletters and catalogs on product returns remains unclear. Affiliate advertising, image advertising, and paid search/online marketing provide customers with additional information that might change their expectations about the product's value. However, these instruments typically provide less product information than newsletters and catalogs. As a result, these instruments may increase or decrease consumers' expected value. The overall effect of these instruments on product returns remains unclear.
Marketing instruments can influence expected value, which in turn impacts product returns. Marketing instruments that provide monetary benefits, such as coupons and free shipping, will increase both expected and experienced product value.
Marketing instruments that provide information, but no monetary benefits, such as newsletters and catalogs, can have a twofold effect on expected value. They can reduce pre-purchase customer uncertainty, but they can also increase expectations. The overall effect of newsletters and catalogs on product returns remains unclear.
Affiliate advertising, image advertising, and paid search/online marketing provide customers with additional information that might change their expectations about the product's value. However, these instruments typically provide less product information than newsletters and catalogs. As a result, these instruments may increase or decrease consumers' expected value. The overall effect of these instruments on product returns remains unclear.
Study 1
Study 1 investigated the impact of marketing instruments on product returns. The study used data from a single-category European apparel online retailer to estimate a fractional logistic regression model. The results of the study show that paid search, free shipping, and coupons have a significant positive impact on product returns, while newsletters have a significant negative impact.
The study first defined the return share as the share of revenue of returned products among all purchased items. The average return share in the study was 31%, which means that for every 100 euros that customers spent, they returned an average of 31 euros.
The study then looked at the impact of the five marketing instruments on product returns. Paid search had the largest positive impact on product returns. This is likely because paid search is a very effective way to reach new customers, and these new customers are more likely to return products than existing customers. Free shipping also had a significant positive impact on product returns. This is likely because free shipping makes it easier for customers to return products, and it also reduces the perceived cost of returning a product. Coupons had a smaller positive impact on product returns.
This is likely because coupons are only effective for customers who are already planning to purchase a product. Newsletters had a significant negative impact on product returns. This is likely because newsletters can lead to customers having higher expectations about the product, which can lead to more returns if the product does not meet these expectations.
The study also found that the impact of marketing instruments on product returns varied depending on the product category. For example, paid search had a larger positive impact on product returns for clothing than for accessories. This is likely because clothing is a more expensive product category, and customers are more likely to return clothing if they are not satisfied with it.
The study's findings have important implications for retailers. Retailers should be aware that the use of certain marketing instruments can increase product returns. Additionally, retailers should consider the potential impact of marketing instruments on product returns when designing their marketing campaigns.
The study used data from a single-category European apparel online retailer. This means that the results of the study may not be generalizable to other retailers or product categories. The study used a fractional logistic regression model to estimate the impact of marketing instruments on product returns. This type of model is appropriate for data that is not normally distributed. The study controlled for a number of factors that could influence product returns, such as customer demographics, product category, and order size.
Discussion
The impact of marketing instruments on product returns. The authors of the study found that some marketing instruments, such as free shipping campaigns and newsletters, can increase product returns. This is because these instruments can increase customer expectations, which can lead to dissatisfaction post-purchase.
The authors of the study make several implications based on their findings. First, they argue that online retailers should be aware that some marketing instruments can backfire by increasing product returns. They also argue that marketers need to individually estimate return effects for different marketing instruments since these effects vary. Finally, they argue that the return effects can vary depending on the product category.
I agree with the authors' implications. I think it is important for online retailers to be aware of the potential negative effects of marketing instruments on product returns. They should also be careful to choose marketing instruments that are appropriate for the specific product category they are selling.
It is important for online retailers to understand the factors that contribute to product returns. These factors can include the product itself, the customer's expectations, and the customer's experience with the retailer. Online retailers can take steps to reduce product returns. These steps can include providing clear and accurate product information, offering a generous return policy, and providing excellent customer service. By understanding the factors that contribute to product returns and taking steps to reduce them, online retailers can improve their bottom line.
