EXTENDED WARRANTY AND ITS IMPACT ON PERCEPTION IN SALES PROMOTION OF DURABLES

Abstract

Purpose – The aim of the paper is to determine the perception of extended warranty when communicated by retailer during the sales promotion of durable products (e.g. refriger-ators). We consider perception as five signals or conceptual dimensions in retail context. The research question is: What perception creates the extended warranty? The dimensions studied can increase or decrease the value and therefore attractiveness of the product. In this sense, extended warranties are a tool that retailers can use to change customers’ attitudes towards a product. There is little primary research that shows how communication of extended warranties influences customer perception and which signals are relevant to customers and retailers. Research methodology – A survey was conducted on a sample of 180 respondents. The measurement model includes extended warranty as a construct with five observed variables related to customer sentiment (risk relief, no cost, quality, price and brand). Each sentiment signal is tested as a separate hypothesis. The model was tested with SEM and CFA was used to inter-pret the data. Findings – In advertising theory, the extended warranty is seen as a signal of better quality and reliability, but we have shown that it creates a sense of risk relief in the purchase decision. Research limitations – Extended warranties can give rise to perceptions other than those ex-amined in the measurement model. For different categories of consumer goods, the warranty features can be perceived differently. Practical implications – Retailers design promotional activities by communicating extended warranty to customers. As a result, they do not perceive promoted object as a more expensive due to warranty provision, even though it offers value to customers. Originality/Value – The originality of the article lies in the different perceptions that arise when customers are confronted with an extended warranty as part of the product promotion in a store. The empirical model proposes a construct of perception of the extended warranty me-diated by a unique combination of signals such as risk relief, no cost sentiment, quality, price, and brand value. Only two signals, namely risk relief and quality, influence purchase intention.