Wujin Chu

Controlling product returns in direct marketing

Many direct marketers offer price refunds to unsatisfied consumers, but as a result some consumers order products with no intention of keeping them. We show that such inappropriate returns can be controlled in a profitable way by imposing nonrefundable charges and that these charges increase with the value of the merchandise ordered. Data collected from clothing mail-order catalogs is consistent with our theory. The shipping and handling charges of these catalogs are usually nonrefundable and increase with the value of the merchandise ordered, even when the actual shipping and handling costs are constant.

Managing Dissatisfaction How to Decrease Customer Opportunism by Partial Refunds

Previous research emphasizes the benefits of generous refunds as part of overall complaint management service policy, yet recent empirical evidence suggests that many retailers have concerns about abusive returns and hesitate to fully compensate dissatisfied customers. We present an analysis of three refund policies-no questions asked, no refunds, and verifiable problems only-and show that no questions asked is the most efficient way to handle consumer opportunism.

Capturing ordinal properties of categorical dependent variables: A review with application to modes of foreign entry

Abstract Marketing reseachers frequently study variables whose values fall into categories that have ordinal properties. Marketers commonly treat such data as though it were strictly nominal (thereby losing information) or aggregate mulitple variables into scales (which significantly increases data requirements). This paper is an exposition of an ordered-response logit ( ORL ) as an appropriate and practical method of capturing the ordinal properties of categorical dependent variables. The ORL gives estimates that are unbiased and at the same time, allows the estimation of a parsimonius model that is readily interpretable. Orl is illustrated via replication of results from a published study on modes of foreign entry: the replication explicitly incorporates a hypothesized ordering of entry modes along a dimension of control afforded to the entrant. It is shown that use of ORL improves interpretability of the estimated coefficients and enhances parsimony over the multinomial logit model in cases where it is reasonable to expect that the underlying categories are indeed ordinal.

Demarketing as a differentiation strategy

Demarketing discourages consumers from buying. This paper shows that demarketing can be a profitable alternative when differentiation through product improvements is not cost effective. The impact of differentiating demarketing on profit, market share, consumers, and total welfare is investigated.

Determinants of bargaining power in OEM negotiations

Abstract The objective of this article is to develop a model that measures the distribution of bargaining power between a sourcer of OEM (original equipment manufacturer) products and a manufacturer (i.e., supplier) of OEM products. The article first introduces the characteristics of OEM contracts that distinguish themselves from other buyer and seller relationships. It then presents a dyadic model of bargaining power between manufacturers and sourcers of OEM products. The model is applied to a case history of OEM negotiations between HS Corporation, A Korean footwear manufacturer, and Nike of the United States. The model proves to be useful in two ways. First, it provides a framework for understanding the dynamics of OEM contract negotiations that transpired between HS and Nike. Second, the model suggests ways each party can enhance its bargaining position.

Online-offline channel conflict: a game-theoretic model with application to the automobile industry

In this paper, we examine cases where internet channels are of lower cost than traditional channels. Under this assumption, we show that the introduction of the internet channel increases profits for the manufacturer. However, if the internet channel is so efficient as to drive the traditional channel out of the market altogether, it is in the interest of the manufacturer to discriminate its wholesale price by charging a lower wholesale price for the traditional channel. This form of subsidy will keep the traditional channel competitive vis-a-vis the internet channel and ensure that there is fair competition at the retail level.