Influencing customers, pricing, and product returns

Digital platforms expose customers to product fit uncertainty, which may inhibit online purchases. As a result, firms may encourage online orders through influence tools such as influencer posts and promotional reviews, which can raise product awareness and be skewed in favor of a purchase. Nevertheless, customers who have ordered under such an influence may eventually return the product if it proves to be a mismatch. In this article, we study the interplay between a firm’s influence decision and its pricing and return policies. We find that a firm is motivated to employ an influence tool if it can effectively promote awareness. Under this scenario, the firm should engage in a meticulous configuration of price, refunds, and level of influence when the net benefit of return is non-negative and the marginal influence cost is low. Otherwise, the firm may rely solely on tailoring influence levels or customizing refunds, but not both, to cope with the price and maximize the expected profit. This highlights the substitution role between influencing customers ex ante and providing refunds ex post . Overall, the use of an influence tool broadens the situations to allow product returns. It also polarizes pricing strategy in that the firm may apply either premium pricing with a tailored level of influence or reduced pricing without any additional influence. Interestingly, aggressive influence actions may be accompanied by less premium in price and more generous refunds. The results provide an overarching strategy and practical guidance for firms in navigating the use of influence, pricing, and return policy design.