An integrated product returns model with logistics and marketing coordination

B Yalabik, Dilip Chhajed, Nicholas C Petruzzi

Research output: Contribution to journalArticle

61 Citations (Scopus)

Abstract

We develop an integrated approach for analyzing logistics and marketing decisions within the context of designing an optimal returns system for a retailer servicing two distinct market segments. At the operational level, we show that the optimal refund price is not unique. Moreover, it is such that if both market segments return a purchased product, then neither segment will receive a full money-back refund; and it is such that if one or both segments do not return a purchased product, then a refund premium over the purchase price is possible, but the refund premium will not be enough to offset a customer's total net cost of purchase and return. We also show that any improvement to the returns system that results in increased logistical efficiency or marketing effectiveness will be accompanied by an increase in the selling price of the product. At the strategic level, we show that if the retailer does not coordinate its logistics and marketing efforts to improve the overall returns system, then it will tend to over-invest in one of the functions and under-invest in the other. Finally, we illustrate how our model can be generalized to the case in which a customer's ex post valuation of the product falls along a continuum.
Original languageEnglish
Pages (from-to)162-182
JournalEuropean Journal of Operational Research
Volume161
Issue number1
DOIs
Publication statusPublished - 16 Feb 2005

Fingerprint

Logistics
Marketing
Customers
Sales
Valuation
Model
Continuum
Tend
Distinct
Integrated
Refunds
Product returns
Costs
Market
Retailers
Market segments
Purchase
Premium

Keywords

  • retailing
  • product returns
  • operations/marketing interface
  • money-back guarantees

Cite this

An integrated product returns model with logistics and marketing coordination. / Yalabik, B; Chhajed, Dilip; Petruzzi, Nicholas C.

In: European Journal of Operational Research, Vol. 161, No. 1, 16.02.2005, p. 162-182.

Research output: Contribution to journalArticle

Yalabik, B ; Chhajed, Dilip ; Petruzzi, Nicholas C. / An integrated product returns model with logistics and marketing coordination. In: European Journal of Operational Research. 2005 ; Vol. 161, No. 1. pp. 162-182.
@article{746b52a37aff44ff8ed57fe2029380cf,
title = "An integrated product returns model with logistics and marketing coordination",
abstract = "We develop an integrated approach for analyzing logistics and marketing decisions within the context of designing an optimal returns system for a retailer servicing two distinct market segments. At the operational level, we show that the optimal refund price is not unique. Moreover, it is such that if both market segments return a purchased product, then neither segment will receive a full money-back refund; and it is such that if one or both segments do not return a purchased product, then a refund premium over the purchase price is possible, but the refund premium will not be enough to offset a customer's total net cost of purchase and return. We also show that any improvement to the returns system that results in increased logistical efficiency or marketing effectiveness will be accompanied by an increase in the selling price of the product. At the strategic level, we show that if the retailer does not coordinate its logistics and marketing efforts to improve the overall returns system, then it will tend to over-invest in one of the functions and under-invest in the other. Finally, we illustrate how our model can be generalized to the case in which a customer's ex post valuation of the product falls along a continuum.",
keywords = "retailing, product returns, operations/marketing interface, money-back guarantees",
author = "B Yalabik and Dilip Chhajed and Petruzzi, {Nicholas C}",
year = "2005",
month = "2",
day = "16",
doi = "10.1016/j.ejor.2003.07.006",
language = "English",
volume = "161",
pages = "162--182",
journal = "European Journal of Operational Research",
issn = "0377-2217",
publisher = "Elsevier",
number = "1",

}

TY - JOUR

T1 - An integrated product returns model with logistics and marketing coordination

AU - Yalabik, B

AU - Chhajed, Dilip

AU - Petruzzi, Nicholas C

PY - 2005/2/16

Y1 - 2005/2/16

N2 - We develop an integrated approach for analyzing logistics and marketing decisions within the context of designing an optimal returns system for a retailer servicing two distinct market segments. At the operational level, we show that the optimal refund price is not unique. Moreover, it is such that if both market segments return a purchased product, then neither segment will receive a full money-back refund; and it is such that if one or both segments do not return a purchased product, then a refund premium over the purchase price is possible, but the refund premium will not be enough to offset a customer's total net cost of purchase and return. We also show that any improvement to the returns system that results in increased logistical efficiency or marketing effectiveness will be accompanied by an increase in the selling price of the product. At the strategic level, we show that if the retailer does not coordinate its logistics and marketing efforts to improve the overall returns system, then it will tend to over-invest in one of the functions and under-invest in the other. Finally, we illustrate how our model can be generalized to the case in which a customer's ex post valuation of the product falls along a continuum.

AB - We develop an integrated approach for analyzing logistics and marketing decisions within the context of designing an optimal returns system for a retailer servicing two distinct market segments. At the operational level, we show that the optimal refund price is not unique. Moreover, it is such that if both market segments return a purchased product, then neither segment will receive a full money-back refund; and it is such that if one or both segments do not return a purchased product, then a refund premium over the purchase price is possible, but the refund premium will not be enough to offset a customer's total net cost of purchase and return. We also show that any improvement to the returns system that results in increased logistical efficiency or marketing effectiveness will be accompanied by an increase in the selling price of the product. At the strategic level, we show that if the retailer does not coordinate its logistics and marketing efforts to improve the overall returns system, then it will tend to over-invest in one of the functions and under-invest in the other. Finally, we illustrate how our model can be generalized to the case in which a customer's ex post valuation of the product falls along a continuum.

KW - retailing

KW - product returns

KW - operations/marketing interface

KW - money-back guarantees

UR - http://dx.doi.org/10.1016/j.ejor.2003.07.006

U2 - 10.1016/j.ejor.2003.07.006

DO - 10.1016/j.ejor.2003.07.006

M3 - Article

VL - 161

SP - 162

EP - 182

JO - European Journal of Operational Research

JF - European Journal of Operational Research

SN - 0377-2217

IS - 1

ER -