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Return Profits

UTA marketing study shows lenient return policy may increase sales

Narayanan Janakiraman

A UTA marketing researcher has demonstrated that retailers may generate more revenue if they employ lenient return policies.

Narayanan Janakiraman, an assistant professor of marketing who specializes in consumer behavior; UTA doctoral candidate Holly Syrdal; and UT Dallas doctoral candidate Ryan Freling recently published their conclusions in The Journal of Retailing.

The team analyzed 22 academic papers concerning return policies in the article "The Effect of Return Policy Leniency on Consumer Purchase and Return Decisions: A Meta-analytic Review." The analysis reviewed five different dimensions: time, money, effort, scope, and exchange.

"There is an inherent belief among businesses that lenient return policies increase product purchase," Dr. Janakiraman says. "While that is true sometimes, businesses must be wary of being too lenient. This meta-analysis shows that retailers may be better served by creating more complex return policies that vary along multiple dimensions instead of just a few."

The team showed that the return policy factors that increase purchases are money and effort leniency. That's different from the return policy factors that influence returns. The research indicates that leniency increases returns while time and exchange leniency reduces returns.

Janakiraman offered an example.

"The same iPad can be purchased from Costco and the Apple Store," he says. "The Apple Store, with its limited and focused Apple product line, is probably focused on reducing returns for the product, while Costco, with its broad base product line, is probably focused on increasing sales of the iPad at their store."


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