How You Treat Customer Returns May Determine Whether Your Customer Returns

   

With a soft economy, many retailers are trying to significantly reduce returns in order to boost profits. Some companies are putting more restrictions and conditions on returns. Frankly, I think this will cause further erosion of sales. Who wants to buy a product that can’t be returned, or that carries so many conditions for return? 

However, others are doing what I call “save the sale”—that is, work with customers to help them understand the product and how to install or use it. Electronics, software and technical products are far and away the biggest problem areas that could benefit from this approach. As a case in point, in the last two weeks our firm had lengthy, painful experiences with two of the major U.S. software companies. One of our people spent five hours on the phone with an Indian call center while trying to install a new version on a laptop. If we had any choice we would have asked for our money back. 

Bill Crutchfield, founder and president of the car and truck stereo direct marketer Crutchfield, learned early on in his business about customer returns. He told one of our benchmarking ShareGroups a while back that he almost quit the business over 20 years ago because returns were so high. Luckily, before he did so, he decided to call many of the customers who were returning products to find out why. What he learned was that the customers were frustrated by not being able to install the product in their vehicle; there were no instructions provided by the vendors! He realized that he would have to invest in documenting how to install those products in each and every vehicle.

Now, Crutchfield has a database of thousands of models that their technicians can use to talk customers through the installation. Crutchfield also developed product mountings to hold the products to the car dashboard and interior, and they produce customer vehicle-specific instructions with pictures. In the end, Bill Crutchfield’s lesson resulted in one of America’s largest, most innovative and customer responsive multichannel marketers.

I have no doubt that how you treat customers with regard to return privileges will greatly affect your future sales. I’d follow the leadership example of companies like Lands’ End and L.L.Bean, with a “no quibble” guarantee. In the case of L.L.Bean, a true story goes that all of their original Maine hunting boots had product problems and most were returned. Leon Leonwood Bean stayed true to his word and refunded the purchase price. But he also stuck with it, correcting the problems and posting a sign in the store: “I do not consider a sale complete until goods are worn out and the customer still satisfied. –L.L. Bean 1916.” If you go to Bean’s Web site, www.llbean.com and look under Company Information, you’ll see many other sterling things they have to say about customer satisfaction.

Drawing upon the Crutchfield and L.L.Bean examples and our own experiences, here are some action points to consider regarding returns:

  • Dig into the reasons for returns through return correspondence, Web and chat messages, and most importantly, call center dialogue. 
  • Merchants should buy net of planned returns rather than gross demand to lesson effects on inventory levels.
  • Returns cost more than orders to process. Streamline the processes and the systems to accommodate returns.
  • Credit customer accounts quickly. Customers are at their credit limits. Lagging credits and refunds add to customer dissatisfaction. 

Remember: How direct marketers treat their customers helps them differentiate the customer shopping experience from that of the mass retailer.