Yes, returns cost businesses billions. But losing customers costs more. The nature of eCommerce retail requires that consumers make a decision to buy a product without ever having touched or experienced the products. Both refund and return policies play a big role in the decision making process for shoppers.
In fact, 49% of shoppers say they read a retailer’s return policy before making their decision to purchase.
Designing a refund policy is not just necessary, it is a strategic element of your business plan. And when you develop your refund policy following a few best practices, a well-crafted refund policy can actually help you sell more.
Why is a customer-centric refund policy so important?
Customer satisfaction is a huge part of brand loyalty. Especially now when consumers are having to be so conservative with their spending. The return/refund process is a time where a business can engage with a customer and further build rapport.
Providing great customer service throughout the return and refund process will help you increase customer loyalty. In fact, studies even show that customers become even more loyal to a business if their problem was handled with grace than they would have been if it had never happened.
When crafting your return and refund policy, consider the fact that returns are often not the customer’s fault. In fact, the majority of all returns are the fault of the retailer dropping the ball somewhere during the process. The reasons include things like: receiving the wrong item, the right item in the wrong color or size, and the product not as described. And oftentimes, a product is damaged or defective when the customer receives it.
The fact of the matter is, even if a customer is unhappy and has to return a product, they will shop with that retailer again if they had a positive refund experience.*
Make your returns and refunds policy about pleasing the customer. Don't make them jump through hoops or feel like there are things they’re responsible for. It's all about customer service and customer satisfaction here.
A retailer’s refund policy affects the overall perception of its brand.
A business’ refund policy can not only affect whether a customer will buy from them again, but it also affects the overall perception of the business. Standing behind a strong refund policy can help set you apart from your competition. Alternately a restrictive refund policy will drive away business.
A full 55% of shoppers report that they will simply move on to a different retailer if they don't think the refund/return policy offers them enough flexibility. In addition, as much as 84% of consumers will not buy from a retailer when restocking and return shipping fees apply.
A well-crafted refund policy helps to alleviate shopping cart abandonment.
In eCommerce, the customer doesn't have the opportunity to see and touch the product. They can't determine the quality except for trusting the reviews. When a customer sees an easy and flexible refund policy it gives them the confidence to make the purchase without worrying.
When a company offers a strong refund policy it tells the consumer that they stand behind their products. In addition, it shows them that the business cares about customer service. Therefore, a flexible return and refund policy will instill trust in your brand and products.
A customer-focused Returns and Refunds Policy can help you reduce your returns rate! Yay!
Sometimes giving generous return options and time frames can help lower your incidence of returns. When people are worried about missing the return window it creates discomfort. They tend to make rash decisions. Best get this back or they’ll lose out on the option.
How can giving people more time and options for returning reduce returns? It seems counter intuitive. But when you give customers more time to decide they don't feel as much pressure or sense of urgency to return the product right away. Once the pressure is off, they have time to sit with the product and see how they feel about it. When they have more time to live with a product the more they get attached to it. And, the less likely they are to return it.
A longer return window also lends to a customer’s forgetfulness. Without the urgency to get it done right away they can put it to the back of their mind. This, on top of the fact that many consumers wait until the last minute to return items in the first place, leads to a decrease in overall returns and refunds.
Addressing customer satisfaction upfront can help keep your credit card processing rates lower.
When customers have a difficult time returning or getting a refund for a product, they end up turning to their credit card company for help. Credit card companies vow to protect their customers no matter what. Because of this, it has become very easy to file a chargeback when consumers want to get their money back for a product they're unhappy with. If a consumer thinks it’s going to be too difficult to deal with the company, they resort to filing a chargeback through their credit card company.
This is bad for many reasons. First, you lose the opportunity to make the customer happy. There’s also the potential they won't come back for future purchases. But there can also be a negative impact on your merchant account and credit card processing rates.
When your chargeback ratio exceeds the allowed threshold, your business is considered a high-risk business. Being a high-risk business requires a high-risk merchant account. This will have a direct impact on your credit card processing rates. In addition, you may be required to enroll in the Visa Chargeback Monitoring Program to track and reduce chargebacks. This all will have a negative impact on your bottom line.
What should a great refund and return policy entail?
Easy to find and easy to understand.
Announce it proudly on your homepage! “No hassle returns!” begin to instill confidence before they even find something they want.
Tell them what they need to know to make an informed decision. Display the Shipping and Return policies on the product page where they are easy to see. Make sure you speak in clear common terms people can understand. This is no place for legalese. Be very clear about what your policy offers by stating clearly whether you give an exchange, a refund, a store credit (or all three).
But don't stop there. It is also important to reiterate your dedication to customer satisfaction on all of your email confirmations and shipping materials.
Give them options.
Customers want what they want, and they all want something different. Give them options. If they really want that item they will want to perform an exchange. Store credit allows time to look for a new item and order it without waiting until they have their refund in hand to purchase again. And a refund means you will have a happy customer that will likely buy from you again *(see above).
A clear and simple procedure.
Return and refund policies should be simple for customers to perform. Clearly state what is expected of them when making a return. Tell them the exact procedure for the return and spell it out for them in a step by step manner. List what they need to include in the return package, how to send it to you, and any time frames that may apply. Make sure to provide your customers with a shipping label. It's just simple customer service.
No “fine print”. Be upfront from the start.
Explain what type of condition the product must be in to return. Decide if you will offer free return shipping or require them to pay for it. Keep in mind that return policies that require the customer to pay to ship it or pay a restocking fee drives customers to your competitors. But, if you have to, make sure you're upfront about the fees and why.
Inform your customer of how long it will take to receive a refund or exchange.
Be sure to include how they will receive their refund. And provide ample time for returns.
A Promise - keep them informed of the status throughout the process.
The last thing you want to do is resolve a customer problem just to have them frustrated in the end waiting for their refund or return. Make sure you provide your customers with status updates throughout the return process. Notify your customer when you have received their return. That way they won't be anxious it may get lost and affect their refund or exchange. Include in the notification an estimate to process the refund or exchange once the return is received. For exchanges, provide them with a tracking number so they can track their item.
Rapid refund processing.
In the event you must process a refund, it is important to have as rapid a processing time as you possibly can. In this day of real-time payments, consumers expect to see their refund almost immediately. Customers will expect their card or account credited in as little as 5 days.
Consumers view long refund wait times very negatively and this can have an impact on brand loyalty. In a survey by Bizrate Insights, 88% of respondents said that if their refund took too long they would either reduce or stop shopping altogether with that retailer.
In the end, a great refund policy is, well, great for everyone.
Processing refunds and returns is a costly business for sure. But when you consider your policy is part of your brand message and customer care, you realize that it is a worthwhile investment in customer retention. Not to mention keeping your good status and low rates with your credit card processor.
If you're looking for best practices for everything from how to set up your homepage to product comparison guidelines to A/B testing, you can find an extensive list compiled with the most up-to-date-research over at cxl.com
At Bankcard International Group, we’re not only here to provide your business with dependable payment processing, but we also want to help our clients succeed. The B.I.G. team is dedicated to providing our clients with helpful tips that aid their success. We believe that by providing the ethical and professional service you deserve coupled with the best rates and tools we can succeed together.
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