The firm-customer exchange process consists of three key parts: (1) firm-initiated marketing communications, (2) customer buying behavior and (3) customer product returns. To this point, the literature in marketing has largely focused on how marketing communications affect customer buying behavior and to some extent how past buying behavior affects decisions to initiate future marketing communications. However, the literature on product returns is sparse, especially with relation to analyzing individual customer product return behavior. While we know the magnitude of the value of product returns is high ($100 Billion per year), how it impacts customer buying behavior is not known due to a lack of data availability as well as a lack of understanding of how product returns truly affect customer buying behavior. Given that product returns are considered a hassle for a firm’s supply chain management and a drain on overall profitability, it is important to study product return behavior. Until we can answer the following questions about what cause customers to return products and what the consequences of product returns are, we cannot understand what role product returns play in the exchange process. These questions include:

1. What are the exchange process factors that describe customer product return behavior?
2. To what extent do product returns affect future customer buying behavior?
3. Are product returns necessary evils for firms?

This research will answer those three questions by empirically demonstrating the role of product returns as a part of the exchange process and as a driver of customer profitability using data from a major retailer. As a result, product returns can be used as a key metric to not only understand its role in the buying decision process, but also how it can be used as a key metric that impacts manufacturers, customers, and public relations.