A colleague and I were recently discussing the return policy of his parents' executive office chair business. His folks were concerned that if they were too liberal with their policy, they would wind up losing money every time somebody returned a chair. I suspected the opposite would be true, and suggested that they extend their return policy to 30, 60, or even 90 days.
The rationale?
The chairs in question are very high-end and cost in excess of $2,000 each. A large portion of their sales come directly from their web site, which means they're asking customers to spend a hefty chunk of change on something they probably can't experience first. Strong copy and sexy imagery can help whet their appetite. But they can only go so far.
Having a strong return policy diminishes the perceived risk for buyers who are on the fence. They get to order the chair, try it out, and if they don't want it, they know then and there that they can return it for a full refund.
Some will. But most of them won't. So the company may take a hit on logistics costs associated with the returns, but they will more than make up for them with the additional sales they earn because of the return policy.
This point was driven home even further in the May 2009 issue of the American Marketing Association's Journal of Marketing (Vol. 73, No. 3). In their article "Are Product Returns a Necessary Evil? The Antecedents and Consequences of Product Returns", authors J. Andrew Peterson and V. Kumar reveal that "customers who return a moderate amount of products tend to purchase the largest amount of products in the future."
They go on to point out that if customers feel good about a retailer's return policy, they will feel less risk when making a purchase and will exhibit stronger brand loyalty in the future. And let's not overlook the fact that many in-store product returns are accompanied by additional purchases during the same visit that may not have otherwise occurred.
So instead of viewing customer returns as a necessary evil that costs money, the wise retailers should position their return policies as an opportunity to minimize anxiety in their customers, create additional sales, and enhance their relationship and loyalty over the long-term.
How does your return policy factor into your marketing plan?
Want to read more about this? You can find the original article abstract at http://tinyurl.com/d96c6d.
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