Reducing Purchasing Risk With Demonstrations and Money-Back Guarantees

Businesses frequently use demonstrations and money-back guarantees (MBGs) as tools to reduce consumer risk from purchasing a product. MBGs are generally more costly and require a greater commitment from the customer. Demonstrations cost less but also generally provide less information. This paper provides a theoretical framework and market examples for understanding how and when businesses will provide, and customers will utilize, demonstrations and MBGs. We discuss when these tools will be used together, alone, or not at all, and show how firms use these marketing tools to reduce consumer uncertainty or misconceptions, provide product know-how, and increase impulse sales.