Effect of Manufacturer Reputation, Retailer Reputation and Product Warranty on Consumer Judgments of Product Quality: a Cue Diagnosticity Framework

Devavrat Purohit, Duke University
Joydeep Srivastava, University of California, Berkeley
EXTENDED ABSTRACT - In many situations, consumers do not know the true quality of competing products before making their purchase decisions. In such situations, consumers may rely on simple heuristics, or cues, to assess product quality (e.g., Rao and Monroe 1989). Although there is a plethora of research on the usefulness of cues in product quality judgments, there are few conclusive and generalizable findings (Dawar and Parker 1994). A potential reason for this limitation is that much of the existing work examines the effect of different cues on quality perceptions in isolation, while most quality assessments are made in the presence of multiple cues. In addition, little effort has been directed towards developing a conceptual framework to evaluate the impact of multiple cues on perceptions of product quality. Consequently, although consumers are exposed to multiple cues simultaneously in the marketplace, there is relatively little understanding of how cues are combined or integrated in assessments of product quality.
[ to cite ]:
Devavrat Purohit and Joydeep Srivastava (2002) ,"Effect of Manufacturer Reputation, Retailer Reputation and Product Warranty on Consumer Judgments of Product Quality: a Cue Diagnosticity Framework", in NA - Advances in Consumer Research Volume 29, eds. Susan M. Broniarczyk and Kent Nakamoto, Valdosta, GA : Association for Consumer Research, Pages: 329-330.

Advances in Consumer Research Volume 29, 2002     Pages 329-330

EFFECT OF MANUFACTURER REPUTATION, RETAILER REPUTATION AND PRODUCT WARRANTY ON CONSUMER JUDGMENTS OF PRODUCT QUALITY: A CUE DIAGNOSTICITY FRAMEWORK

Devavrat Purohit, Duke University

Joydeep Srivastava, University of California, Berkeley

EXTENDED ABSTRACT -

In many situations, consumers do not know the true quality of competing products before making their purchase decisions. In such situations, consumers may rely on simple heuristics, or cues, to assess product quality (e.g., Rao and Monroe 1989). Although there is a plethora of research on the usefulness of cues in product quality judgments, there are few conclusive and generalizable findings (Dawar and Parker 1994). A potential reason for this limitation is that much of the existing work examines the effect of different cues on quality perceptions in isolation, while most quality assessments are made in the presence of multiple cues. In addition, little effort has been directed towards developing a conceptual framework to evaluate the impact of multiple cues on perceptions of product quality. Consequently, although consumers are exposed to multiple cues simultaneously in the marketplace, there is relatively little understanding of how cues are combined or integrated in assessments of product quality.

In this paper, a conceptual framework is developed to assess the effects of manufacturer reputation, retailer reputation, and product warranty on product quality judgments. Briefly, the framework differentiates between two types of cues: high-scope and low-scope. High-scope cues evolve over time such that their valence cannot be changed instantaneously, e.g., reputation of the manufacturer or the retailer. Rather, in order to change the valence of a high-scope cue, particularly from the negative to positive, considerable investments in both time and money are required. Given that the valence of high-scope cues are established over time and cannot be changed easily, high-scope cues should be perceived to be more credible and consequently more diagnostic relative to low-scope cues. High-scope cues can also be regarded as "stand alone" cues in the sense that the diagnosticity of such cues is relatively less dependent on the presence/valence of other cues. Examples of high-scope cues include brand name and reputation.

In contrast, low-scope cues are transient and their valence can be changed relatively quickly and inexpensively; thus, such cues can potentially be used to send false signals (e.g., changing the price or warranty o a product). Consequently, low-scope cues are less diagnostic and are ambiguous in assigning a product to a particular quality category (see Hoch and Deighton 1989). The implication is that the perceived likelihood of a particular product belonging to a specific quality category is much higher when based on a high-scope cue relative to a low-scope cue. However, the relative diagnosticity of low-scope cues may vary with the presence/valence of associated high-scope cues that are available. The rationale is that a firm associated with a positive high-scope cue is less likely to send a false signal, thus making the associated low-scope cues more diagnostic. In contrast, a negative high-scope cue makes the associated low-scope cues less diagnostic. Thus, the positive (negative) inferences evoked by the high-scope cues transfer over to the low-scope cues making them more (less) diagnostic. This implies that when the associated high-scope cue is positive, consumers will be more sensitive and thus more likely to use a low-scope cue in assessing product quality. Examples of low-scope cues include warranty, money-back guarantee, and free-trial offer.

The conceptual framework is used to assess the effects of manufacturer reputation, retailer reputation, and product warranty on product quality judgments. Consider a scenario in which a manufacturer sells through an independent retailer. Similar to manufacturer reputation, retailer reputation is a high-scope cue and its valence cannot be changed instantaneously. Although this high-scope cue is only indirectly linked to the product, retailers with a high-quality reputation still have incentives to preserve their reputation by screening out poor quality manufacturers and offering high quality products. Note that according to the cue diagnosticity framework, because both manufacturer reputation and retailer reputation are high-scope cues, the diagnosticity of each cue is relatively less dependent on the valence of the other cue. This implies that regardless of its reputation, a manufacturer should receive a "boost" in quality perceptions by selling through a high-quality retailer than by selling directly or through a low-quality retailer.

Now suppose that a manufacturer with a reputation for manufacturing low quality products has indeed improved the quality of its product. Since the manufacturer suffers from a poor reputation that was established with prior products, merely informing consumers about the change in product quality would not be effective. Further, given that the negative high-scope cue (manufacturer reputation) makes the low-scope cue (product warranty) less diagnostic, offering a better warranty coverage will not lead to higher perceptions of product quality.

While the cue diagnosticity framework suggests that the diagnosticity of high-scope cues is relatively independent of other cues, the diagnosticity of low-scope cues varies with the valence of high-scope cues. This implies that if the low-quality manufacturer were able to sell its product through a reputed retailer, the positive high-scope cue not only helps directly but also indirectly by making the low-scope cue more diagnostic. The direct effect occurs because high-quality retailers are likely to carry high quality products in order to preserve their reputation. Regardless of manufacturer reputation, going through a reputed retailer thus serves to ratify product quality and indicates that the manufacturer is not likely to be a fly-by-night operator. Consequently, selling the product through a reputable retailer provides some assurance to consumers when the manufacturer reputation is poor. The indirect effect comes from the positive inferences evoked by the high-quality retailer transferring over to the low-scope cue. Thus, the warranty becomes more diagnostic and the likelihood of it being used in quality judgments increases. This implies that regardless of manufacturer reputation, a better warranty coverage should lead to higher perceptions of quality when the product is sold through a high-quality retailer.

Results of two studies provide support for the framework. Specifically, consistent with the framework, the two studies show that the lowscope cueBproduct warrantyBis indeed used in making product quality judgments when at least one of the high-scope cues, manufacturer reputation or retailer reputation, is positive. The implication is that unless a manufacturer with a poor reputation goes through a reputable retailer, it cannot convey improvements in product quality through a warranty.

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