Returns and Refunds: 7 Best Practices to Build Brand Loyalty

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Returns and refunds sound like something companies should want to actively avoid as it must mean a loss of revenue and customer loyalty, right? Wrong. Research has shown that indeed having a flexible, customer-centric returns policy where returns are almost welcomed, goes a long way with building brand loyalty and increasing the value of customers over the long term. Let us take a closer look at what the research says about returns policy and how you might update your policy to improve the long-term value of your customers.

What the stats are saying?

66% of online consumers will review a company’s returns and refunds policy before deciding if they will purchase. In fact, a shocking 81% of those consumers will only hit ‘Buy Now’ button if the company offers free returns.

In addition to free returns, customers are looking for returns policies that promise quick processing, a returns shipping label regardless of whether or not a return is made and a no-questions-asked approach. Those are some convincing numbers that suggest consumers are expecting a more lenient, easy and cost-effective way of backing out of any purchases they make.

A Journal of Marketing study revealed that brands with a free returns policy see an astounding 457% increase in expenditure from consumers after they experienced a free, no-hassles return. Likewise, there was a 75-100% decrease in expenditure after being required to pay for return shipping.

Unfortunately, online retailers are also far more vulnerable to returned goods than their brick-and-mortar counterparts. This happens for a variety of reasons, including a mismatch in descriptions, quality or sizes compared to the physical product; unwanted gifts; damages in transit; incorrect items shipped. If a business wishes to improve customer retention and increase sales, then a flexible and well-written returns policy is essential.

Have comprehensive product data

Take the time to build quality product data. This involves ensuring that titles, copy, images and product content is true and accurate. Do not overlook this step as the mismatch between perception and what is received is a leading reason behind returned goods. Of course, another advantage of spending time on this step is the opportunity to improve SEO and subsequent discoverability on search engines. A win-win!

Ask for reviews

Encourage reviews from previous customers and make them easy to find for new customers. This builds trust in your consumers and will help to bridge the gap between descriptions and studio-worthy images with the physical product and how it functions on a day-to-day basis.

Improve fulfillment accuracy

This is a straightforward way of reducing returns and increasing customer satisfaction. Instigate robust shipping processes that reduce the opportunity for errors to sneak in and result in incorrect products shipped. One way to do this is to use an automated system that can log and pool all order information from your various sales channels and filter it into the central warehouse, ensuring it is all accurate. It also helps to track your inventory through an inventory management software so you know where your products are at any stage in the supply chain.

Use an online returns portal

An alternative to including a free returns label with every product is to set up an online returns portal that can manage the entire process from start to finish. This increases customer satisfaction by providing an easy and convenient way to return items while also decreasing the amount of staff the company must allocate to managing returns. Ideally, processing times will also be decreased which further enhances the customer experience.

Increase the returns deadlines

An effective way to increase the customer experience and trust is to increase the length of time they have before a product is no longer eligible for return. Despite this seeming as if it would increase the rate of returns, the opposite is in fact true. The University of Texas research shows that ‘the endowment effect’ comes into play whereby the longer the time customers have a product, the more attached to it they become and the less likely they are to return it.

Increase ease and availability

It is vital to make the returns process straightforward. A good way to do this is to allow in-store returns to any store. This is particularly applicable to large, bulky items as it saves customers the difficulty associated with packaging items sufficiently so that no damage occurs in transit and a return is actually accepted.

Maintain open communication

To avoid communication issues and dissatisfaction, ensure the returns policy is communicated clearly, stating the company’s and the customer’s unique obligations and what condition returned goods must be in for acceptance. By ensuring everything is clearly stated and outlined, communication errors and frustration are avoided.

These are just a few of many returns best practices that you could adopt in your policy to enhance your customers’ experience and willingness to make repeat purchases. The key is ensuring that despite the hassles or increased manpower required, the whole process is focussed around your customer.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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