Kids laugh and scream as the Tea Cups whirl around at Disney World. Waiting in line to ride, Baohong Sun photographs her two young children and husband.
Back home in Pittsburgh, she unpacks, puts the children to bed, and does laundry—unintentionally washing her digital camera. Irreplaceable memories are lost.
When buying a new camera, Sun impulsively agrees to an extended service contract, which is product insurance sold by the retailer that extends beyond the warranty. Most experts agree that ESCs aren't worth the price. Sun knew that before her purchase; yet, there it is on her receipt. The Carnegie Mellon professor of marketing at the Tepper School of Business is puzzled by her motivation. Her intellectual curiosity asks: "Why do consumers buy extended service contracts?"
So she analyzed data provided by a retailer's electronics department, making the study unique because it didn't use a controlled setting. Results were published in the Journal of Consumer Research, a widely read academic publication featuring empirical, theoretical, and methodological articles that explain consumer behavior.
The study documented that most products "are unlikely to fail during the term of the warranty," making an ESC an added expense of limited or no value. Sun found, though, that consumers are prone to buy ESCs for "pleasure purchases" such as cameras. "Buyers often place more value on pleasure purchases, feeling there is a greater risk to their well-being if the items don't function, so buyers willingly pay extra to protect them."
Her camera warranty expired months ago. "Never used."