Does your returns policy put people off?

If you want to improve your profit and number of transactions per customer then change your returns policy.

Listening to the BBC Radio 4 today I heard of an interesting study into the returns policies of a number of companies. The study group was given unprecedented access to customer data from a wide number of retail chains with a variety of different returns policies, ranging from some businesses that did not allow any purchases to be returned, right through the continuum to others that were very free on their return policy.

The results of the study were quite interesting and in some ways counter-intuitive. The companies that had the most relaxed attitude to people returning products were the ones that made more profit per customer – in some cases doubling the profit per customer. So what was behind this phenomena?

The study found that when something was returned, the purchaser very often then went shopping in the store again while they were there and as a result spent more money. If they were given store credit for their return they usually spent more on the replacement; even when they were given cash they often bought other things while they were there, thus increasing the profit level.

People who return things generally still have the need (or a need) for the object they bought. So, provided you don’t annoy them in the process of exchanging/returning the product the likelihood is they will still spend the money with you.

People who had a good experience in returning the items came away with a positive feeling about the experience and thus were more likely to return to the store where they were treated well; not only that they were more likely to tell all their friends about the positive experience which, in turn, attracted their friends to the store.

The study did find that there were, of course, people who abused open returns policies (one man allegedly took full advantage of a ’30 day no quibble return’ policy on electrical goods by taking them home, using them for 28 days then returning them to try another!). Nevertheless, overall the positive outcomes outweighed the negative and the message was be more open with your returns policy as it will improve your bottom line.

So, what can you do to improve your returns policy and make the process a better one for the customer?



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