How to set a return policy that works for the customer and you

01 May
How to set a return policy that works for the customer and you

Posted 04:42h in

Customer Service

by Sam Kliger

A store's return policy is an important part of your overall approach to customer service, but it's not as simple as making your guidelines strict or lenient. Return policies are very specific to your brand and what you're looking to accomplish — there is no one-size-fits-all strategy.

In general, brands that are focused on gross margin dollars and profit will have a stricter return policy. The reality is, return fraud is rampant, and according to the NRF, returns cost retailers $260 billion in 2015. Mature brands who already have a passionate consumer base, like Hermes or Forever 21, have the luxury to offer exchange-only policies.  

For emerging brands, it's not as cut and dry. Many default to stricter policies — whether it's exchange only, limited return windows, receipt requirements — as a necessity for short-term survival. They simply can't afford to have a lenient policy.

But newer brands that are trying to establish strong relationships with its customers may ease their policies to earn this loyalty. These business models prioritize customer acquisition and the Customer Lifetime Value (CLV) and the power of good customer service to boost the bottom line. Brands that are focused on a happier consumer base, loyalty, and retention tend to have more lenient return policies. Think Zappos (free shipping), Nordstrom (no receipt necessary), and Ikea (365 days to return). All those brands boast a strong emotional connection with its shoppers.

The facts back it up as well. In a survey conducted by Happy Returns, 85 percent of shoppers are more likely to shop retailers who offer

  • No cost returns.
  • Immediate refunds.
  • Ability to drop returns to a local store.
  • Allowing returns without a receipt.

Companies should calculate the pros and cons of each return path before they decide which policy works for their company's future. When in doubt, always put a higher price on the customer experience. Often the results are not easily quantifiable, but if your return policy can improve, boost, or enhance the customer experience, you will see long-term gains in the end. Harvard Business Review asked companies what their most valuable customers do for them. They said:

●    They give us good ideas.
●    They evangelize for us on social media.
●    They reduce our costs.
●    They collaborate with us.
●    They try our new products.
●    They introduce us to their customers.
●    They share their data with us.


As the value of a customer evolves, how should our return policies? What developments can be made or creative policies enacted to improve the customer experience and continue to drive future revenue? Some ideas:


> Offer an in-store return bonus. If getting a customer to return in store will decrease costs and potentially lead to additional sales (UPS survey found that 70 percent of online shoppers made an extra purchase when returning to brick and mortar store), can you offer an incentive for anyone who returns an item in store?

> Personalize the return policy based on the customer. Place return limits on a customer who shows a high-volume of returns; reward a customer with free returns for the first 3 returns. Evolving technology and CRM tools allow retailers to have insight into a customers' return habits.

> Offer creative pricing scenarios. Take StitchFix: they offer customers the option to keep everything in their shipment and earn an additional 25 percent off the purchase price. Anecdotally the widespread customer sentiment proves that it works: "It makes more sense to just keep it all."


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