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Hassle-free Returns: Customer Satisfaction or Missed Interaction Opportunity?
Rethinking your return policy can both reduce returns and create better customer relationships.
For the rest of the November 2000 issue of CRM magazine please click here
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Lately, we have been assailed by a barrage of statistics reminding us of the increased pace of Internet business. A recent study by Keynote Systems reported in Business 2.0 cites the average download times for the search engine Yahoo as 0.68 seconds per page. Altavista and Lycos follow at 1.82 and 1.90 seconds, respectively. The current rule of thumb is that visitors to your Web site must be able to complete the desired transaction in "three clicks or they're out," to find another more accommodating (read faster) site.

This push to service the customer in a rush has helped to foster the prevailing urban legend that customers will not do business with vendors who waste their time by asking questions. How then are merchants who wish to service their clientele by providing ever more personalized offers going to obtain the customer preference information they need to create those targeted offerings? One often overlooked opportunity for customer interaction and extremely useful data collection is the return process. 

Admittedly, the best and most cost-effective policy is to ensure that customers leave the store, Web storefront or catalog with the right product to meet their needs. That, of course, leads to a discussion about how vendors can make sure that their preferred selling channel (retail outlet, Web page, catalog or partner) emulates the best sales person. Particularly in a Web-based selling environment, effort should be put into navigating the customer through the buying process so that he selects the product that fits the bill. This can be achieved by some simple techniques, such as first finding out what the customer wants to do with the product or what features she requires and then directing her to the reduced list of products that service that purpose.

But let's assume that despite your best efforts, your customer is not happy with a purchase and wants to return it. Many merchants feel compelled to take back the product and refund the purchase price with "no questions asked." However, it might be useful to look at this "no questions asked," hassle-free return process and examine why it may actually be the wrong process for both you and the customer.

The starting premise for our discussion is that people make a purchase because they need a product for some particular situation. While you may not be able to prove this by looking at the shopping behavior of teenagers or shopaholics, the majority of purchases address basic needs. This is especially true of food-, clothing- and shelter-related acquisitions. While I may choose to buy a filet mignon instead of a pound of ground chuck, I am still responding to the need to satisfy my hunger.

Unless I am one of those unpredictable young people living away from home for the first time, I probably will not stop to consider whether I also need to buy a frying pan to cook the filet (or hamburger). But when a merchant is dealing with customers who purchase a product with which they are unfamiliar, the merchant must be sure buyers have all the components they need to make the product work in their environment.

What does this have to do with the return process, you ask? In conversations with Bernie Fidler from stuart and Associates (www.bettersales.com), I learned that two of the more common reasons that certain types of merchandise have high return rates are the sale of an "incomplete" product and the customer's inability to use the product. Fidler cited some statistics from the consumer electronics market showing that the average return rate for televisions is 7 to 10 percent, and 15 percent for DVDs. What is interesting to note is that the return rate for digital cameras was 40 to 45 percent during the first two months after the product was introduced.

These numbers point out that though merchants often presume products are returned because they don't work, in reality, customers often do not know how to operate the products properly. Citing Fidler, two thirds of the time, customers return a product because they feel there is something wrong with it. Yet, in only half of those cases are the products actually defective.

So this brings us to the drawback of a hassle-free return policy. It is only when customers are asked why they are returning the product that the facts can be uncovered. Remembering that the customer bought the product to satisfy a need, we suggest that all merchants ask basic questions, such as "What is not working to your satisfaction?" "What functions were you looking for when you purchased our product?" and, "Have you found this product cheaper somewhere else?"

If the customer has found a better deal elsewhere, the best policy may be to offer to meet the price on the spot. This prevents the return and is certainly more convenient for the customer. If, on the other hand, the customer is one of the many who is not operating the product properly, then some instruction is needed. In both cases, the return is averted and the customer's need for a working product is met by shifting the focus of the process from an efficient return into making sure the customer has what she needs. Selling a product is when the work to create a satisfied customer starts. 

Here are some ways to ensure that every return becomes an opportunity for customer interaction:

  • Connect sales promotions with the returns process: Make sure that the returns or service department and the call center are aware of sales promotions before they occur. If an unusually high rate of returns occur following any promotion, that information needs to be included in planning the next promotion. When evaluating the effectiveness of promotional activity, the return rate must also be calculated.
  • Collect customer feedback from all points of contact in the organization: Often the information on why the customer is not getting the maximum use from a product can be found in another department. Take the example of the cordless phone that needs 24 hours to charge the battery before first use. If the call center detects a high incidence of calls on that topic, the information should be shared with other departments so a remedy can be found. For example, if the returns center is frequently instructing the customer on battery charging, the design group may want to create better packaging with a clearer set of directions. 
  • Ask questions during pickup and return: Those merchants who offer a pickup service for the return of goods must build in a process for getting customer feedback. They could capture this information by asking "returns preventing/needs filling" questions during the phone call the customer makes to arrange the return or exchange. At a minimum, they should have a means to follow up with customers to get their input.
  • Train personnel handling returns to diplomatically uncover critical information: A confrontational return process--forcing customers to justify why they are bringing the product back--is the other extreme of a "no questions asked" process. This will not yield the information about customer confusion that is needed to improve the situation. Employees in the returns department need training to address customer complaints in a non-confrontational way, and they must be authorized to take corrective action on the spot.

All enterprises need to examine how the information uncovered in the return process is used to satisfy the current customer and to serve the next customer better. The goal should not be simply to process a return, but to preempt the need to make a return by selling the customer the right thing in the first place and making sure he knows how to use it properly.

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