Research out of University of Arizona’s Eller College of Management Denounces Money-Back Guarantee Programs as Being “Gimmicks”

Nov. 15, 2022

News
Faculty Research
Faculty Insights

Those seeking in vitro fertilization (IVF) service may well be considered one of the most vulnerable demographics in the market, with a highly patient-specific and customized treatment protocol. With the stress of the financial, physical and emotional impacts of this journey, money-back guarantee (MBG) programs might seem like a dream come true. But are they? Or are they too good to be true?

That is what a recent study in part out of the University of Arizona’s Eller College of Management aimed to determine. The results of the research by Shan Yu, assistance professor of marketing at the Lally School of Management at the Rensselaer Polytechnic Institute; Mrinal Ghosh, Gary M. Munsinger endowed chair in Entrepreneurship & Innovation at the Eller College of Management; and Madju Viswanathan, assistant professor of marketing at the Indian School of Business in Hyderabad, India were recently published in the Journal of Marketing Research.

 The authors assess the differences in the quality of care between clinics that offer MBG programs and those that do not to investigate whether these programs can serve a purpose consistent with signaling and insurance theories.

According to the report, “Using an instrumental variable approach to account for the endogeneity of MBG decisions made by fertility clinics, the authors find that MBG clinics, on average, offer better treatment outcomes in terms of success rates while undertaking lower risks. The results are consistent with signaling theory predictions that market-based programs like MBGs can serve as signals of unobservable clinic quality despite the incentives for clinics to engage in opportunistic behaviors.”

So while MBGs may have gotten a bad rap as being “marketing gimmicks” or “fertility casinos,” the authors research states that MBG clinics “seem to offer better ‘quality of care’ than non-MBG clinics.” And though the study is focused on IVF services market, the report states that the results could be extended to other markets including legal and financial services.