Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
Effects of Framing Message on Extended Warranty Intention:
The Moderating Role of Risk Preference, Time Period, and
Product Type
Yi-Fen Chen and Hsien-Kuang Pu
This study investigates the framing messages display on purchase
intention in online shopping, and conducted a 2 (positive
message/negative message) x 2 (risk seeking/risk avoidance) x 2 (search
good/experience good) x 2 (long warranty time/short warranty time)
online experiment involving 640 subjects. Product type moderates the
framing message in regard to purchase intention. The results of the
experiment demonstrate that subjects’ purchase intentions are more
positive in regard to online buying of experience goods with warrantees
using negative framing messages, and search goods’ warranty using
positive framing messages. Consumers prefer to purchase long warranty
contracts rather than short warranty contracts in online shopping. These
findings allow sellers and managers to find better ways to provide optimal
options in online shopping. In the conclusion of the paper we present
implications and limitations of the study, and suggest directions for future
research.
JEL Codes:
1. Introduction
Online shopping pervades daily life and has changed consumer behavior to the extent that
retail stores have been replaced by online stores to a significant extent. We now live in the
web2.0 generation in which online stores thrive (Joseph et al., 1997). On the one hand,
people have realized that there is no obvious difference between visible and invisible
stores; in fact, cheaper prices in online stores mean that, comparatively, invisible online
stores hold an advantage over visible retail stores. Sellers benefit by economizing on costs
previously invested in visible stores, and consumers benefit because the saving of these
costs translates into lower prices and greater product diversity. Moreover, the convenience
of shopping online increases consumer purchase intention, which has been changed by
logistic systems, to the extent that consumers feel that it is often unnecessary to shop in
visible retail stores. On the other hand, consumers are now limited by the information
available to them.
Risk preference plays a crucial role in consumers’ decisions to use a product. Consumers
who are averse to risk will tend to avoid risk, damage and loss; they will try to minimize the
value that they could gain and maximize the damage that they would be unwilling to
accept. Conversely, consumers whose personalities are risk-seeking would not care about
the risks involved in purchasing a product. Despite this, the online store has an advantage
over the retail store.
__________________________________________________
Dr. Yi-Fen Chen, Chung Yuan Christian University, Taiwan. Email: fen1307@gmail.com
Hsien-Kuang Pu, Chung Yuan Christian University, Taiwan. Email:jeff784142002@hotmail.com
Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
However, there is still one condition that impacts not only visible stores but also invisible
stores, namely warranty (Chen et al., 2009). According to the psychology-related literature,
people pay more attention to protecting and maintaining their product, and care about
subsequent service and warranty. Although warranty is an important element that
guarantees consumer rights, it only provides a tangible contract with intangible promises.
Online stores only illustrate a warranty by text message, which consumers rely on to
provide them with the positive or negative information that induces them to pay attention
to their warranty contract (Brooks & White, 1996; Jack & Murthy, 2007; Hartman &
Laksana, 2007).
Consumers are willing to purchase from online stores insofar as this is convenient for
them. This is especially the case with electronic products where consumers have gathered
relevant information about the product from daily life and experience with social networks.
When this is the case, consumers often lose focus and forget some of the conditions of the
purchase, such as after-sales service and warranty; the risk of damage is shifted to the
consumer. While online stores can increase their profit by these deals, they often lose the
goodwill of their consumers in the long run.
Fortunately, most electronic products now include a warranty that online stores reveal
during the purchase. Online stores have also begun to provide long-term service that
increases their revenue and maintains their positive relationship with the consumer. Once
products become the property of consumers, they become afraid of losing it; in order to
reduce this risk, they purchase an extended warranty (Padmanabhan & Rao, 1993).
Extended warranties show solicitude on the part of the online store; consumers are
cautious about making decisions about product types that will satisfy them. Product types
in online store are divided into two categories: search goods and experience goods.
Search goods information can be searched online so that consumers can understand how
to operate them. Experience goods refer to the use of the product by the consumer, which
allows consumers to evaluate the experience of the product.
To date, prior studies have specifically investigated the moderating influence of the
framing message on extended warranty intentions. The purpose of this study is to examine
the framing message on online warranty intentions. In addition, the study discusses the
construction of the framing messages (positive/negative) that online stores show, beside
the electronic products, risk preferences (risk seeking/risk avoidance), product type
(search good/experienced good) and extended warranty intention (short/long), as
moderating factors.
2. Literature Review
The decision of a consumer to purchase an extended warranty is important to both sellers
and buyers (especially in online shopping) and is influenced by the framing message, the
consumer’s risk preference, the product type and the length of the warranty. Prospect
theory will first explain the framing message and risk preference and, second, will explain
the warranty and product type. Previous research found that the framing message could
be divided into two respective sections (Smith & Petty, 1999.) Attribute framing is used to
deliver the message to the decision makers, for example, a positive message versus a
negative message and a happy message versus an unhappy message (Levin et al., 1998.)
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Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
2.1 Prospect theory
Prospect theory shows that people making decisions are influenced by the message
display. Moreover, under prospect theory, people are classified according to the effect of
the message: whether it leaves them feeling certain or uncertain (Nelson, 1970), and also
demonstrates the risk preference of consumers. According to the theory, consumers
always make the evaluations by the preference point; these evaluations are divided into
benefit and cost (Tversky & Kahneman, 1981.)
Most consumers are concerned about how much they earn and how much they may get
or lose. The utility function uses the preference point as the origin, and assumes that
gaining profit is higher than the origin. Conversely, below the origin signifies losing their
benefit. Under the gain profit, people always focus on the benefit and use the subjective
norm to determine the higher value; they become risk seeking (concave). Otherwise,
under the loss profit, people will become more risk adverse (convex). Combining both of
these perspectives could help consumers’ psychological thinking in reaction to the framing
message. Due to consumers’ concerns, the framing message will be divided into positive
or negative messages; both influence the extended warranty intention.
2.2 Framing message
When consumers face positive messages, their attitude tends to risk aversion. On the
other hand, when consumers face negative information, they become risk seeking. When
simultaneously facing both, the negative message will be more effective than the positive
message in regard to the product’s appraisal. Levin & Gaeth (1988) found that a positive
framing message obtained a positive result from consumers in regard to ground beef;
consumers bought more beef with the percent-lean than with percent-fat (Levin & Gaeth,
1988.) Especially in regard to an extended warranty for the product, a negative message
will affect the consumer more and shift them to be conservative and risk averse. Thus, the
following hypothesis is proposed:
H1. Consumers exposed to a negative framing message will have a higher extended
warranty intention for the target product than those exposed to a positive framing
message.
2.3 Risk preference
For the consumers’ preference, risk could be distinguished by three aspects. Risk-seeking
consumers have the courage to undertake the risk; their personality is adventurous. The
risk averse are conservative and avoid risk; they afraid to bear the loss. The others are risk
neutral. Farley (2000) distinguished consumers as risk seeking or risk averse. Risk averse
consumers focus on minimizing the risks; their behavior leads them to hesitation and
consideration. In particular, risk averse consumers prefer to protect their property from
damage. In other words, they seek safety and stability. Conversely, the risk seeking
person is willing to face risk (Litwin & Stringer, 1968.) Robbins (1992) implied that the
extent of the risk could be assumed by people’s willingness to accept said risk. For
example, risk seeking people prefer investing in stocks rather than funds. The extended
warranty provides another formula to give the risk averse a sense of safety. Accordingly,
the following hypotheses are proposed:
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Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
H2a. A positive framing message results in lower extended warranty intention for a
risk seeking consumer than for a risk adverse consumer.
H2b. A negative framing message results in higher extended warranty intention for a
risk adverse consumer than for a risk seeking consumer.
2.4 Warranty time period
Consumers are always concerned about the product quality when they are made of
unknown materials. Sellers provide a warranty to reduce consumers’ risk, enhance their
reputation and increase customer loyalty (Erevelles et al., 1999.) Shelley (1994) and
Epstein (1977) showed that the decreased evaluation was not just related to the product
bought, but also to the way the value was recognized. In particular, negative information
causes consumers to find ways to decrease the risk of loss (Chatterjee et al., 2005), and
research suggests that consumers implicitly try to maintain the value that they realized
after they have made their purchase decision (Livesey & Lennon, 1978; Myers,
1967).Thus, the following hypotheses are proposed:
H3a A positive framing message results in lower extended warranty intention with a
short period of warranty than with a long period of warranty.
H3b A negative framing message results in higher extended warranty intention for
with a long period of warranty than with a short period of warranty.
2.5 Product type
Online consumers rely on online information; there are two types of information sources:
market information and consumer experience (Bailey, 2005). Klein (1998) found that
search product should be easily recognized by the consumers’ subjective norms. Senecal
& Nantel (2004) argued that search goods should have clear attributes so that consumers
can simultaneously compare them to other products on the website. Conversely, it is
difficult for consumers to evaluate experience products by the direct information provided
on online auctions. Consumers do not get a strong advantage from online purchasing
(Mitra et al., 1999). Purchasing an experience product is fraught with uncertainly. Klein
(1998) also argued that consumers could avoid uncertainty related to the virtual
experience by accessing preview users; it helps both seller and consumer reduce some
risk from online purchasing. Consequently, online transactions of search products entail
more certainty than those of experience products (Hu et al., 2008). Nelson (1974)
indicated that the product type could be differentiated by the evaluation. The evaluation of
the search product is obviously immediately cognitive and objective. Conversely, the
experience products need more process orientation, user experience and user
performance. In other words, experience products need to collect information from users
regarding the product consumption, since key attributes of the experience product are
relatively more difficult to capture compared to search products (Mudambi et al., 2010).
Weathers et al. (2007) classified goods by the quantities of product information, except for
the reading of information from online auctions.
As mentioned above, prior research distinguishes the product type according to two
categories: search goods and experience goods; as consumers could only classify the
information on the online shopping, they were more willingly to purchase search goods
than experience goods through the internet. Product experience in the online transaction
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Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
will increase consumer purchase intention through the extended warranty’s reduction of
the uncertainty risk of experience product. Thus, the following hypotheses are proposed:
H4a. A positive framing message results in lower extended warranty intention for a
search good than for an experience good.
H4b. A negative framing message results in higher extended warranty intention for
an experience product than for a search product.3. The Methodology and
Model
3.1 Research framework
The research framework is illustrated in Figure 1. Framing message, the independent
variable, was manipulated both positively and negatively. Extended warranty intention was
chosen as the dependent variable. The risk preference, warranty time period and product
type were chosen as moderators. The risk preference was manipulated into two types: risk
adverse and risk seeking. Warranty time period was divided into two levels: long and short.
There were two dimensions of product type: search and experience.
Risk preference
(risk adverse/ risk seeking)
Framing message
(positive/ negative)
Product type
(experience good/ search good)
H2
H4
H1
Purchase
Intention
H3
Warranty time period
(long/ short)
Figure 1. Research framework
3.2 Sample
Following Perdue & Summers (1986), all manipulation checks were performed during
pretests. Pretests were necessary to achieve effective online manipulations. For this
pretest, a sample of 30 consumers was used. Pretest subjects were not included in the
final sample.
Subjects were asked to evaluate the nature of a set of product classes (iron necklace,
haircut, restaurant, concert, induction cooker and coffee machine). For each product class,
subjects were asked whether products could either be evaluated as either a (1) search
product or an (2) experience product. The results of the pretest indicated that the induction
cooker was perceived as the most “search” product (t= 6.50, M= 2.6, p<0.001) and that the
coffee machine phone was perceived as the most “experience” product (t=5.44, M=2.4,
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Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
p<0.001). The difference between the evaluations of the two product classes was
significant.
3.3 Experimental design and procedure
The experiment was a 2 (framing: positive/negative) x 2 (risk preference: risk seeking/risk
adverse) x 2 (warranty: long/short) x 2 (product type: search /experience product) online
experiment. Table 1 illustrates the experimental design of this study.
Experimental
Groups
Group 1
Table 1 Experiment Design
Framing
Risk
Warranty time
Message
Preference
Period
Long
Group 2
Risk
Seeking
Group 3
Group 4
Group 5
Short
Positive
Message
Long
Group 6
Risk
Adverse
Group 7
Short
Group 8
Group 9
Long
Group 10
Risk
Seeking
Group 11
Group 12
Group 13
Group 14
Group 15
Short
Negative
Message
Long
Risk
Adverse
Group 16
Short
Product
Type
Search good
Experience
good
Search good
Experience
good
Search good
Experience
good
Search good
Experience
good
Search good
Experience
good
Search good
Experience
good
Search good
Experience
good
Search good
Experience
good
3.4 Measure and Analysis Methods
This study measured the influence of consumers’ risk preference on their buying intention,
using a dichotomous variable. According to Kogan & Wallach (1995), the subjects were
categorized by sample mean as possessing either high or low risk preference. The
measurement scale developed by Kogan & Wallach (1995) was used to assess risk
attribute (Farley, 2000).
The dependent variables were framing message and purchase intention. The
measurements developed by Fishbein & Ajzen (1975) were rated using 5-point Likertscales (1= strongly disagree; 5= strongly agree).
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Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
Additionally, this study adopted SPSS 19.0 for windows to analyse the data, including:
1. Descriptive Statistics: To describe the sample profile directly
2. Reliability Analysis: To assess the internal consist of the constructs examined in this
study by Cronbach's α coefficient
3. Analysis of Variance (ANOVA)
4. The results
Cronbach's α coefficient is above 0.7, recommended by Cortina (1993). Therefore, the
reliability of the framing measurement is appropriate to test our hypotheses. The expected
results and summary of the hypotheses in this study are shown in Table 2.
Table 2 Expected Summary of Hypotheses Test
Hypotheses
Expected
Result
H1
Consumers exposed to a negative framing message will have a
higher extended warranty intention for the target product than Supported
those exposed to a positive framing message.
H2a
A positive framing message results in lower extended warranty
intention for a risk seeking consumer than for a risk adverse Supported
consumer.
H2b
A negative framing message results in higher extended warranty
intention for a risk adverse consumer than for a risk seeking Supported
consumer.
H3a
A positive framing message results in lower extended warranty
intention with a short period of warranty than with a long period of Supported
warranty.
H3b
A negative framing message results in higher extended warranty
intention for with a long period of warranty. than with a short Supported
period of warranty.
H4a
A positive framing message results in lower extended warranty
Supported
intention for a search good than for an experience good.
H4b
A negative framing message results in higher extended warranty
Supported
intention for an experience product than for a search product.
5. Summary and Conclusions
The main objective of this paper was to unravel the distinct effects of framing messages in
e-commerce transactions, and to compare the relative impact of risk preferences and
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Proceedings of 8th Asian Business Research Conference
1 - 2 April 2013, Bangkok, Thailand, ISBN: 978-1-922069-20-7
warranty time period in two different product contexts. Our findings provide a theoretical
holistic understanding of the mechanisms by which different information affects decision
making and purchase intention by the consumer. The findings are potentially useful to
managers who wish to design sales-efficient e-commerce Web sites and construct longterm relationships that enhance online consumers’ overall shopping experience.
Specifically, this study provides a finer-grained understanding of the impact of positive
and negative framing messages on consumers’ decision making and risk preference, as
well as how these affect different types of consumers.
Prior research (Alexander, Ryad & Thomas Hess, 2012) found that controlling for the initial
informational needs of users, in regard to product type or framing message, would be
useful to validate the effect of the different individual cases toward positive and negative
framing messages, as found in this paper. Furthermore, while the study’s constructs
exhibit good potential trends for the seller, we believe that additional investigation would
be useful to effectively create value.
Currently, ways of online purchasing are changing with the advancing technology.
Transactions on the internet are the trend. People can easily become sellers or buyers in
the C2C e-commerce. Consumers can share their beliefs regarding online transactions.
The warranty as a contract is one of the conditions determining sellers’ reputation and
product options. In the maturing of online shopping, people will be more concerned about
safety and security, and avoid uncertainly. These concepts of online transaction have
become important to the sellers. They seek to understand consumer attributes and cater to
consumer demands in order to obtain the value from the exact product information they
give on the website. Practically, the study provides interesting insights into how warranty
time period, product types and risk preference can be used to probe either framing
message or purchase intention. Further research could be used to probe the relationship
between the warranty and company reputation, and also be used to foster the relationship
between the seller and consumer based on loyalty-building and product type. It is hoped
that the present study’s results will be useful to related future research.
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