When a manufacturer and retailer meet to discuss the selling of product, often the subject of returns comes up. The management of customer returns is as much a part of selling most products as shelf space allocations or package design. The methods that can be used to reduce the number of consumer returns are less often discussed than the policies and procedures used to govern them. This is unfortunate because the best way to reduce the cost of returns is to reduce the number of items that consumers present for return. This can and should be accomplished by education, precise, easily understandable instructions, and a common sense approach to meeting the needs of consumers. The practice of producing ever more strict returns policies will only turn off customers and, in the end, reduce sales. Retailers have proven this over and over again.
Let’s look at a few best practices that a manufacturer can use to help consumers avoid the need to make a store return.
- Helpful packaging, if the item needs to be assembled, let the picture on the carton be one that shows the whole unit, after assembly, in a clear way, hopefully from more than one angle. If the loaf of bread that the bread maker produces is round, don’t show a picture of a rectangular loaf of bread on the package. Remember to use the package as your first line of defense against returns and your first opportunity to educate the consumer about your product.
- Instructions and package inserts, be certain that they are accurate and easy to understand. Do not let the engineers write, proofread, and approve the instructions. By all means try them out on executive assistants, spouses, warehouses workers or even an executive or two. Make sure that there are pictures that accurately reflect how the pieces fit together and how the unit will look at various stages in the assembly process.If it is a consumer electronic product, be certain that all the connecting wires or ends are color-coded and that the wires are bundled when possible. If it is possible to label parts or wires with a letter or number, by all means do so. Regular folks find that to be of great assistance in assembling a product. Note those facts in the instruction manual. All instructions and inserts should be written in multiple languages. Use a brightly colored insert to ask consumers to call your 1-800 technical support line before returning the product to the retailer as well as printing it in multiple places in the assembly instructions themselves.
- Have an 800 technical support line. The number should be on all instructions and box inserts that are available to the consumer. In large, clear fonts specify that customers must call the technical support line before returning the item to the retailer. The support line should be staffed when your customers are most likely to need it. That means evenings and weekends. This is the time when most of your customers will be assembling your products. It is always amazing to me when I see a support line open from 9:00am to 4:30 pm, Monday thru Friday. Make sure that the people who answer the phone can plainly speak the language. I know that overseas call centers are a popular means to control costs but when your customers are calling your help line they are generally already frustrated with your product. Do you really want to give them another reason to be upset with your company? Call the help line yourself, on different days of the week and at different times of day and night to see what kind of service you get.
To summarize, look at the ways to reduce store returns that have the most positive effect on consumers. You will quickly see that making effective use of your packaging, instructions, inserts and 1-800 tech support lines are the most cost effective method of improving customers satisfaction and reducing product returns. These methods are time-tested ways to make the sale stick and keep customer returns to a minimum.
The best way to reduce the financial impact of returns is to reduce the amount of product that is returned by your customers. Figuring out ways to actually reduce customer return is usually the first thing executive bring up when discussing what to do about the negative impact of returns, but it is usually the last thing they try to do anything about.
When faced with the challenge of actually reducing consumer return rates, the natural reaction for many executives is to tighten the customer return policy. While this does reduce the amount of goods returned, it also greatly reduces total sales. In fact, a study conducted by MIT Sloan found that a lenient return policy does tend to increase the volume of items returned but the ratio of returns to sales actually drops. Customers see a lenient return policy as a way to mitigate the risk of buying so they buy more and return more items but much less as a percentage of total purchases.
If you look at other examples of companies that have adjusted their customer return policies over the years, the conclusions are clear. Restricting customer return policies does much more to reduce SALES than it does to reduce the percentage of good returned. If reducing customer returns is the goal, the answer clearly is not to tighten up your customer return policy. There are more effective steps that can be taken that actually will reduce customer return rates and they all happen to be much more customer friendly, which promotes sales.
The reasons for return at a high level are generally the same. Across every industry, regardless if the product is industrial or consumer goods, the most common reason for return is some form of customer remorse. According to the National Retail Federation, United States consumers return over $194 billion in 2010. Of this, $17.7 billion was from fraud and abuse. Other studies have found that only 20%, or $40 billion of consumer returns is actually defective.
Clearly, the steps one would take to reduce the 20% of returns that are defective would be completely different than actions taken to reduce fraud and abuse. If you treated the other 70% of customer who return goods like they were perpetrating a fraud, you would eventually go out of business. The biggest opportunity to have a real impact on return rates is to focus efforts on reducing this 70% group of valued customers.
The first step in reducing the return rate is to identify the top 20 items returned by dollar value. Once you have the top twenty identified, organize them by category or some other appropriate.
For complex items that require instructions and/or user guides to operate, get a copy of the instructions / user guides and read them. You will be surprised how poorly many of them are actually written. Take a new item home and ask your spouse to put the item together or use it. Do not help them just observe them and take good notes.
Next, look at the trouble shooting section. Where is the trouble shooting section? Is it easy to find? Is it easy to read? Does it make sense? Again, take good notes.
If there is a help line you can call. Call it. We worked for a client who sold a household appliance that had to be mounted on the side of the customer’s house. When we called the 800 number that was on the carton to get help, we got a recording that said their hours were from 9:00 am to 4:00 pm Monday through Friday. Our client was very surprised when we told them this. Their target customer installs their item after work or on the weekend, when there was no phone support. This was a quick fix for them to reduce the rate of return.
If items are in a box, put flyers that provide clear instructions to customers for common mistakes or questions. Make the trouble shooting information easy to find. Just because it is trouble shooting information doesn’t mean it should be a lot of trouble to find or figure out. If instructions and guides are difficult to find, read, or follow, you will see return rates climb.
Packaging and labeling are often overlooked but could be a source of returns. A number of years back when they first started selling bread makers for the home, the return rates were very high. In fact, the first model had return rates close to 80% of sales.
The manufacturer was upset, the buyer was mad, and there were a lot of customers where were not happy. It was a bad situation for all. We were asked to sample a large group of returned bread makers and determine what the real reasons for returns were.
When we tested the bread makers, less than 5% were actually defective. We then noticed that on the bread maker’s carton was a picture of the bread maker on a nice kitchen counter. Sitting next to the bread maker was a nice, brown, rectangular loaf of bread. The problem was that the bread maker make smaller round loafs of bread. The company changed the pictures on the carton, highlighted the fact that the bread maker made delicious, ROUND, loafs of bread, and sales took off and the return rate dropped dramatically.
For items sold online, check your labeling and the narrative on the net. Also, according to Dr. Mark Ferguson at Georgia Tech, items sold on the internet that have customer reviews and comments, on average, have 20% fewer returns than other similar items without customer reviews.
There are customer friendly things that can be done to reduce customer returns. Training sales employees is always a great idea and spending time examining an item’s instructions and packaging can yield surprising results. Studying why products are returned and figuring out customer friendly solutions will increase your bottom line by reducing returns, while improving customer relations and sales.