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A strategic view of refurbished goods (CD)

By: Roy, Pinaki.
Material type: materialTypeLabelBookPublisher: Ahmedabad Indian Institute of Management Ahmedabad 2018Description: 116 p.Subject(s): Refurbished Goods | Strategic View | Pricing Implications | Customer Perception FormationDDC classification: TH 2018-10 Summary: ‘Refurbished goods’ is a class of goods that is growing in popularity among the customers and in strategic importance among the manufacturers and resellers. This class of goods includes goods that are deemed unfit for sale at full price for reasons such as being unboxed but then returned unused by the customer. These goods are then ‘refurbished’ i.e. brought back to full functionality through a process of rigorous testing and repairing till they reach original manufacturing specifications. Such products are then sold by the manufacturer itself or by third-party resellers at deep discounts, making them attractive options for segments of customers looking for higher value at lesser cost. The present thesis explores strategic implications of these goods from a customer point of view, providing insights into the customer perception formation, pricing implications, consequences to other product offerings, and customer trust on such products. The thesis comprises of three main studies, each looking at a different aspect of refurbished goods. The first study explores the customer’s reaction to the lower prices of refurbished goods and their consequent pricing perceptions regarding the higher priced new products. The study uses Price Fairness literature to explore how negative emotions play a role in the mental processing of customers as they deem the full price of new product offers as unfair when exposed to the lower price of their refurbished counterparts. The study comprises if two vignette-based experiments using responses of 490 (250 +240) undergraduate students. Using the hierarchical regression methodology, the first experiment finds that consumers exposed to the lower prices of refurbished goods undergo negative emotions due to which their perceptions towards the full price of new products are affected. The second experiment finds that the unfairness perceptions generated due to this causes negative post-purchase behavior such as reduced repurchase intention and negative word of mouth behavior. The study also finds that seller identity, warranty strength, and reputation of the seller of refurbished goods affect this phenomenon. The second study explores the possible strategic uses of refurbished goods, as a decoy, to influence the customer’s choice of certain targeted options, not the refurbished product itself, among a set of available options. The study explores this possibility and the conditions under which it exists using 213 responses from working professional of a technology-based company collected through a vignette-based survey experiment. The results indicate that refurbished goods can be used as a decoy to selectively increase the choice probability of the new product counterpart of the refurbished product used as a decoy. This phenomenon, however, was only found in cases where the customer was under a budgetary constraint. Factors of refurbished goods such as seller identity and seller reputation were examined to find their salience in this phenomenon. The third study looks at the customer's trust perceptions of refurbished goods and how promotions targeted at these trust perceptions affect the customer’s willingness to purchase the refurbished goods. It looks into a new dimension of trust regarding refurbished goods: institutional trust i.e. whether the customer trusts the process of 5 refurbishing. The study uses 180 responses from working professionals of a technology-based company collected through a vignette-based survey experiment. The results indicate, while, seller reputation is a strong factor affecting the customer’s willingness to purchase refurbished goods, as supported by existing literature, additionally but the customer’s trust placed on the process of refurbishing is also significant. Theoretical and managerial implications of the studies are summarized at the end of the thesis alongside scope for future research.
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Reference TH 2018-10 (Browse shelf) Not for Issue CD002564

‘Refurbished goods’ is a class of goods that is growing in popularity among the
customers and in strategic importance among the manufacturers and resellers. This
class of goods includes goods that are deemed unfit for sale at full price for reasons
such as being unboxed but then returned unused by the customer. These goods are
then ‘refurbished’ i.e. brought back to full functionality through a process of rigorous
testing and repairing till they reach original manufacturing specifications. Such
products are then sold by the manufacturer itself or by third-party resellers at deep
discounts, making them attractive options for segments of customers looking for
higher value at lesser cost. The present thesis explores strategic implications of these
goods from a customer point of view, providing insights into the customer perception
formation, pricing implications, consequences to other product offerings, and
customer trust on such products.
The thesis comprises of three main studies, each looking at a different aspect of
refurbished goods. The first study explores the customer’s reaction to the lower prices
of refurbished goods and their consequent pricing perceptions regarding the higher
priced new products. The study uses Price Fairness literature to explore how negative
emotions play a role in the mental processing of customers as they deem the full price
of new product offers as unfair when exposed to the lower price of their refurbished
counterparts. The study comprises if two vignette-based experiments using responses
of 490 (250 +240) undergraduate students. Using the hierarchical regression
methodology, the first experiment finds that consumers exposed to the lower prices of
refurbished goods undergo negative emotions due to which their perceptions towards
the full price of new products are affected. The second experiment finds that the
unfairness perceptions generated due to this causes negative post-purchase behavior
such as reduced repurchase intention and negative word of mouth behavior. The study
also finds that seller identity, warranty strength, and reputation of the seller of
refurbished goods affect this phenomenon.
The second study explores the possible strategic uses of refurbished goods, as a
decoy, to influence the customer’s choice of certain targeted options, not the
refurbished product itself, among a set of available options. The study explores this
possibility and the conditions under which it exists using 213 responses from working
professional of a technology-based company collected through a vignette-based
survey experiment. The results indicate that refurbished goods can be used as a decoy
to selectively increase the choice probability of the new product counterpart of the
refurbished product used as a decoy. This phenomenon, however, was only found in
cases where the customer was under a budgetary constraint. Factors of refurbished
goods such as seller identity and seller reputation were examined to find their salience
in this phenomenon.
The third study looks at the customer's trust perceptions of refurbished goods and how
promotions targeted at these trust perceptions affect the customer’s willingness to
purchase the refurbished goods. It looks into a new dimension of trust regarding
refurbished goods: institutional trust i.e. whether the customer trusts the process of
5
refurbishing. The study uses 180 responses from working professionals of a
technology-based company collected through a vignette-based survey experiment.
The results indicate, while, seller reputation is a strong factor affecting the customer’s
willingness to purchase refurbished goods, as supported by existing literature,
additionally but the customer’s trust placed on the process of refurbishing is also
significant.
Theoretical and managerial implications of the studies are summarized at the end of
the thesis alongside scope for future research.

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