BOSTON—Uses for and the appeal of gift cards continues to grow.
New research indicates that offering product exchanges or gift cards for returns, rather than crediting a customer’s card, may be retail’s best option to reduce the cost of online returns. Consumers were found to be more open to spending money again with a retailer when consumers chose to accept an exchange or gift card rather than just get the money back, according to researchers, RetailWire reported.
“We theorize that this refund effect occurs because consumers psychologically realize the loss of money when purchasing products and earmark that money for spending,” wrote the researchers from the University of Toronto and Questrom School of Business at Boston University in the study. “Thus, consumers feel a smaller psychological loss when spending refunded money than unspent money on a subsequent purchase.”
Six Experiments
Across six experiments, research participants were found to be more likely to spend money from a product refund than from a work bonus, for example. Participants were even more likely to spend refunded money than unexpected income, like lottery winnings and tax refunds, RetailWire stated in its analysis.
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