Shan Yu, Rensselaer Polytechnic Institute – Are Money-Back Guarantee Programs by IVF Clinics Marketing Gimmicks?
On Rensselaer Polytechnic Institute Week: How do you know if you’re falling for a marketing gimmick?
Shan Yu, professor of marketing, has some tips.
Dr. Yu’s research interests primarily focus on using empirical models to examine how marketers utilize varied marketing strategies to help consumers make more informed decisions in numerous marketing domains such as healthcare, social media, entertainment, and high technology B2B. In particular, she utilizes information economics theories to analyze the determinants, mechanisms, and implications of marketing practices such as money-back guarantees, medical crowdfunding design, new product development, and technology licensing contract designs.
Are Money-Back Guarantee Programs by IVF Clinics Marketing Gimmicks?
Money-back guarantees are prevalent in many expert-service markets presumably to serve as a signal of quality that alleviates the financial burden for consumers. However, they are also decried as marketing gimmicks that take advantage of vulnerable and poorly informed consumers.
In this study, my co-authors and I examine the controversial use of money-back guarantees in medical clinics offering in vitro fertilization. IVF services are financially expensive, physically challenging, and emotionally stressful for the patients. And, because the doctor is far more knowledgeable than the patient, a situation known as information asymmetry, some critics argue that fertility clinics that offer money-back guarantees have a stronger incentive to increase the success rate to avoid paying the money back by unethically sorting more fertile patients to their clinics or by using more aggressive treatment protocols.
What we found was that, on average, clinics offering money-back guarantee programs achieve better treatment outcomes in terms of success rates while undertaking lower risks on patients with similar fertility.
Money-back guarantees may not necessarily be marketing gimmicks. Instead, through experience, clinics may have developed a repository of skills and expertise that make them confident in offering consumers such strong assurances of success.
Our results provide evidence that, in markets fraught with asymmetric information, programs like money-back guarantees can act as signals of unobservable quality.