A clear and flexible return policy is an excellent way for businesses to build trust with customers. When consumers purchase from a company that guarantees a product that’s as good as advertised and offers protection, they’ll be more likely to come back as repeat customers. But what if you encounter customers who exploit your return policy? Most often than not, they buy intending to use your product ONCE, with no plans of keeping it then ask for a refund. This can prove problematic when you’re trying to manage cash flow and can drain your profits. Here’s how you can prevent consumers from exploiting your e-commerce return policies.
Differentiate legitimate returners from abusive returners
Let’s get it straight; a return policy encourages more customers to purchase from your business quicker. However, only customers who make legitimate returns are profitable. Not the same could be said for a few who abuse return policies. Most people return things when they deem the quality of a product is not up to par, which is understandable. But there are offenders who continue to purchase goods, use them once, bring them back to the store, and ask for a refund. Numbers show that abusive returners cost companies a great deal of profit. Customers who took an average of two months to complete their returns can affect profitability because the value of the products at the time of return was lower than it had been at the time of purchase. So, what can business owners do? It’s vital to analyse your customer’s purchase behaviour and segment these consumers based on profitability. In simple terms, you have to make the distinction between legitimate returners from abusive returners and tailor your return policies accordingly.
Tailor your return policies
Make clear during the return process that returns are welcome but are restricted depending on the reason for the return. If a customer has a clear history of unreasonable returns, you can outright refuse the return transactions. You can also include a provision in your return policy that customers will have a limited time to bring items back. When they exceed this time, they will have to pay extra charges. They will also have to pay the shipping fees should they make returns. Additionally, you can apply fees to products such as seasonal items and electronics that may lose value over time.
Research suggests that rewarding customers can reduce return rates. The Keep Reward is a new promotion strategy that provides customers incentives to keep a product. But you may ask – is it plausible that customers will keep a product they’re not fully satisfied with because of a small reward? Well, not exactly. As a business owner, you can still offer free returns AND a reward. For example, customers who bought clothing from your store will get free shipping on their next order if they keep all the items. This reduces the intention to return by 37%. However, keep in mind that this scenario will not play out every single time. Further analysis shows that buying frequency matters for the Keep Reward system to work. Another factor lies in the type of product you’re selling. The Keep Reward strategy works best in return-sensitive industries, such as clothing stores that experience high amounts of excessive return rates. In businesses with customers who are likely to exploit their return policy, the keep reward strategy is more effective when reducing return rates.
Increase engagement with loyal customers
As discussed above, strategies like the Keep Reward work when you’re dealing with frequent shoppers. Because of that, you need to engage more with loyal customers. Loyal customers are your brand ambassadors, and they provide valuable feedback on your products. Plus, loyal customers tend to be more forgiving when your business has lapses in production or services. In this case, a keep reward strategy may work well in your favour. But there are other incentives you could give out and include in your loyalty program to encourage loyal customers – free shipping, discount coupons, or a gift on their next order.
Reduce return rates with an excellent loyalty program
Reduce return rates by engaging with loyal customers who help your brand become better without negatively impacting your cash flow. With Bartercard, we can help you build an excellent loyalty program to reward deserving customers and patrons. Contact us today to get started!