Featured Research

from universities, journals, and other organizations

Extended Service Contracts: When And Why Do People Buy Them?

Date:
June 15, 2009
Source:
University of Chicago Press Journals
Summary:
Consumer experts have long recommended against buying Extended Service Contracts with products, since they are rarely cost effective. A new study in the Journal of Consumer Research examines the reasons why so many people ignore the experts' advice.

Consumer experts have long recommended against buying Extended Service Contracts (ESCs) with products, since they are rarely cost effective. A new study in the Journal of Consumer Research examines the reasons why so many people ignore the experts' advice.

Related Articles


Authors Tao Chen (University of Maryland, College Park), Ajay Kalra (Rice University), and Baohong Sun (Carnegie Mellon University) used purchase data from the electronics department of a retail chain to examine who buys the extended service contracts and what factors drive their decisions.

"The first finding is that the type of product category matters," write the authors. "Consumers are more prone to buying ESCs for hedonic (pleasure-related) products such as game controllers than for utilitarian products like printers." The authors suggest that hedonic products hold more value than utilitarian products and consumers may expect to keep hedonic products longer. "The pain of potential loss is higher for hedonic products, making insuring the product more attractive," the authors write.

Price promotions also play a role in service contract purchases. For example, when consumers discover an unadvertised price promotion after coming to a store, they are more likely to use the unexpected savings to buy service contracts.

The researchers also discovered that low-income consumers are more likely to buy Extended Service Contracts than wealthier customers. "This is probably because poorer consumers cannot afford to replace the product if it breaks down," write the authors. "Poorer consumers are also more likely than rich consumers to use money saved from promotions to buy the ESCs," the authors add.

The authors did not find that gender affected the rate of purchase for service contracts. But they did find differences between men's and women's reasons for buying them. "Men are much more sensitive to the costs involved in replacing the product in case it breaks down," write the authors. "There may be some truth to the stereotype of men being responsible for repairing gadgets; and therefore they are more willing to buy ESCs to avoid the hassle."


Story Source:

The above story is based on materials provided by University of Chicago Press Journals. Note: Materials may be edited for content and length.


Journal Reference:

  1. Tao Chen, Ajay Kalra and Baohong Sun. Why Do Consumers Buy Extended Service Contracts? Journal of Consumer Research, 2009;

Cite This Page:

University of Chicago Press Journals. "Extended Service Contracts: When And Why Do People Buy Them?." ScienceDaily. ScienceDaily, 15 June 2009. <www.sciencedaily.com/releases/2009/06/090615171625.htm>.
University of Chicago Press Journals. (2009, June 15). Extended Service Contracts: When And Why Do People Buy Them?. ScienceDaily. Retrieved January 28, 2015 from www.sciencedaily.com/releases/2009/06/090615171625.htm
University of Chicago Press Journals. "Extended Service Contracts: When And Why Do People Buy Them?." ScienceDaily. www.sciencedaily.com/releases/2009/06/090615171625.htm (accessed January 28, 2015).

Share This


More From ScienceDaily



More Mind & Brain News

Wednesday, January 28, 2015

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

City Divided: A Look at Model Schools in the TDSB

City Divided: A Look at Model Schools in the TDSB

The Toronto Star (Jan. 27, 2015) Model schools are rethinking how they engage with the community to help enhance the lives of the students and their parents. Video provided by The Toronto Star
Powered by NewsLook.com
Man Saves Pennies For 65 Years

Man Saves Pennies For 65 Years

Rooftop Comedy (Jan. 26, 2015) A man in Texas saved every penny he found for 65 years, and this week he finally cashed them in. Bank tellers at Prosperity Bank in Slaton, Texas were shocked when Ira Keys arrived at their bank with over 500 pounds of loose pennies stored in coffee cans. After more than an hour of sorting and counting, it turned out the 81 year-old was in possession of 81,600 pennies, or $816. And he&apos;s got more at home! Video provided by Rooftop Comedy
Powered by NewsLook.com
How Technology Is Ruining Snow Days For Students

How Technology Is Ruining Snow Days For Students

Newsy (Jan. 25, 2015) More schools are using online classes to keep from losing time to snow days, but it only works if students have Internet access at home. Video provided by Newsy
Powered by NewsLook.com
Weird Things Couples Do When They Lose Their Phone

Weird Things Couples Do When They Lose Their Phone

BuzzFeed (Jan. 24, 2015) Did you back it up? Do you even know how to do that? Video provided by BuzzFeed
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Health & Medicine

Mind & Brain

Living & Well

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins