Abstract Although money-back guarantees (MBGs) have a long tradition in marketing and retailing practice, a deeper understanding of how consumers value this instrument is still lacking. The results of two experimental studies show that in addition to cognitive effects, MBGs evoke a positive emotional response, thereby increasing consumers’ purchase intentions and willingness to pay a price premium. Moreover, MBGs positively affect consumers’ responses for search and experience goods, although for experience goods, MBGs should be designed with stricter return conditions as compared to MBGs for search goods.

The results should help retail managers understand the consumer impact of MBGs, as well as assist them in pricing guaranteed items and designing effective MBGs according to the type of product. © 2011 New York University. Published by Elsevier Inc. All rights reserved. Keywords: Money-back guarantee; Risk perceptions; Emotions; Willingness to pay a price premium; Search and experience goods Introduction By offering a money-back guarantee (MBG), a seller promises that any customer who is not satis? ed with a purchase can return the item within a certain period and receive a full refund (Davis, Gerstner, & Hagerty 1995).