Protecting brands from product failure using extended warranties

Publication Date18 November 2019
DOIhttps://doi.org/10.1108/JPBM-09-2018-2019
Date18 November 2019
Pages787-799
AuthorKiran Karande,Mahesh Gopinath
SubjectMarketing
Protecting brands from product failure using
extended warranties
Kiran Karande and Mahesh Gopinath
Department of Marketing, Strome College of Business, Old Dominion University, Norfolk, Virginia, USA
Abstract
Purpose Product failures can lead to customer dissatisfaction, negative brand attitudes and a loss of brand equity. The purpose of this paper is to
investigate whether extended warranties offer a mechanism to mitigate the negative effects of product failure and the mediating role of positive and
negative self-directed emotions.
Design/methodology/approach The hypotheses are tested using two 2 2 between-subjects experiments with product failure and warra nty
purchase as the two factors, attitude toward the brand as the dependent variable, positive and negative self-directed emotions as mediating
variables and attitude toward warranties as a covariate.
Findings It is found that the decline in attitude toward the brand due to product failure is greater among customers purchasing an extended
warranty, than among those who do not. Moreover, positive and negative self-directed emotions mediate this relationship.
Originality/value Manufacturers are for the most part not involved in distribution or administration of extended warranties, which are mainly
sold through retailers and administered by companies that specialize in extended warranties. The study ndings indicate that contrary to industry
practice, consumer-durable manufacturers should consider more active management and promotion of exte nded warranties to protect their brands
equity from the negative effects of product failure.
Keywords Brand attitudes, Product failure, Extended warranties, Self-directed emotions
Paper type Research paper
Retailers offer extended warranties for many products such as
at-panel high denition televisions, laptop computers and
digital cameras. Under an extended warranty, the insurer pays
for the repair or replacement of the item for a specic period,
usually two to ve years after the manufacturers warranty has
expired. Research on extended warranties has mainly focused
on the design and price of the contract (Estelami et al., 2016;
Jack and Murthy, 2007;Hartman and Laksana,2009;Li et al.,
2012;Heese, 2011) and the reasonsto buy extended warranties
(Chen et al., 2009;Jiang and Zhang, 2011). Despite their
protability for retailers (Myung and Eger, 2015;Chen, et al.,
2009), the management of extended warranties has been
outsourced by manufacturers to retailers or to specialist third-
party companies. Thus, manufacturershave essentially taken a
passive approach to offering extended warranties. Contrary to
this industry practice,we suggest that it might be in the interest
of the manufacturer to be more activelyinvolved in offering an
extended warrantyto protect their brand name.
In this research, we investigate the effects of warranty purchase
and product failure on attitude toward the brand, and propose
the mediating mechanism by which these effects occur. We rst
demonstrate that when a product fails, the attitude toward the
brand among customers who purchase an extended warranty is
more favorable than among those who do not. Thus, in contrast
to the hands-offapproach of manufacturers, our study suggests
that manufacturers should be more actively involved in
encouraging customers to purchase extended service warranties.
This is crucial as product failure is one of the important causes of
product dissatisfaction and reduction in brand loyalty, which can
potentially impact the customer-based equity of the brand
(Hamzelu et al.,2017;Umashankar et al.,2016;Brady et al.,
2008). Brand attitudes and beliefs, among other factors, create a
network of associations that inuence brand knowledge, which
builds or diminishes brand equity (Keller, 1993). We argue that
extended warranties offer a mechanism to mitigate negative
brand effects, and protect the brand from the negative effects of
product failures.
This research focuses on the process by which brand
attitudes are formed and how they vary as a consequence of
product failure and warranty purchase, which is shown in
Figure 1. We draw upon the literature on emotions (Bagozzi
et al.,1999) to propose that product failure in the presence and
absence of an extended warranty elicits different levels of self-
directed positive and negative emotions, which in turn
determine the attitude toward the brand; thus, positive and
negative emotionsact as mediators.
It is important to differentiate extended warranties from
manufacturer warranties. While manufacturer warranties are
granted to every customer at no additional cost, extended
warranties are offered as an option for a price to consumers to
make a choice. In addition, while customers do not have to
decide whether to buy a manufacturer warranty, customers
have to make a deliberate decision regarding the extended
The current issue and full text archive of this journal is available on
Emerald Insight at: www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
28/7 (2019) 787799
© Emerald Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/JPBM-09-2018-2019]
Received 19 September 2018
Revised 14 January 2019
2 March 2019
Accepted 5 March 2019
787

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