One of the findings of the Finscope MSME 2012 study of the local small and medium enterprises (SME) sector was that many SME entrepreneurs faced the challenges of lack of customers, too many competitors and the inability to identify new customers. These problems are worsened by the entrepreneurs’ lack of both financial and human resources to deal with these challenges. An effective strategy which most entrepreneurs neglect to their own detriment is the use of customer retention. Customer retention enables businesses to get closer to their customers, establish their needs and serve them better. One very effective way of doing this is by putting in place a sound return policy.
Many entrepreneurs regard returns as an absolute no-no because all they see in this strategy are losses. They fear that their customers will take advantage of the return policies to fleece them. Yes, return fraud abounds the world over but the benefits far outweigh the disadvantages. This is the reason why reputable Zimbabwean retailer brands like Transerv and OK use them. They do not just pull out and dust the policies when a complaint has been lodged, but print them on their transaction receipts. This is because they know that if properly formulated, good return policies help to earn customers’ trust which forms the basis for repeat business and referrals.
Poor handling of returns and complaints is one of the reasons why customers move their business from one enterprise to another. This is worsened by lack of clear returns and customer complaint handling policies. Lack of a good returns policy places your customer contact team members between your policies and the unhappy customer and most often the victim is the customer as your team members try to keep their jobs.
Historically, returns were retailers’ way of vouching for the products they sold. This means that if for some reason the customer did not like the purchased product, they could return it for the full value of what they paid for it. This was an unconditional agreement which guaranteed the quality of the product sold. An enterprise’s return policy is an important factor in customers’ purchasing decisions. A carefully planned return policy which is visibly displayed in your customer service area is crucial to attracting and keeping your customers. A perfect retail return policy can help to increase sales because many customers look for it. Customers still view return policies as guarantees which indicate the trust retailers place in the products they sell.
Return policies differ from one retailer to another. Some retailers offer to repair returned goods, others replace the returned goods while others refund the customers for the returned goods. These policies depend on circumstances. A repairing policy works where a good is damaged during delivery or in the hands of the customer during the tenure of the guarantee. Where goods have been returned due to a workmanship fault and they cannot be repaired, they will have to be replaced. Sometimes due to stock outages a retailer may have to refund the customer. A customer may be so upset with his purchase that even if the retailer could replace the returned goods, he still insists on a refund. These are only examples of how other retailers handle returns.
When formulating your policy ensure that it is concise and clear. Avoid ambiguities like requiring your clients to bring their returns “within reasonable time” when you can specify the length of time that they have to assess their purchases. It is clearer to state that your customers should return the goods within 30 days of purchasing them than saying that they should return them within reasonable time.
Clearly state other attendant return costs to the customer like restocking fees, and handling fees. Some retailers insist that if a client bought goods using a credit card the refund should be credited to their credit card account to prevent possible return of stolen merchandise. Returns fraud is a reality which you have to guard against and address adequately in your return policy formulation.
A balanced policy
Ensure that your policy strikes a balance between customer user-friendliness and effectively protecting your enterprise from being a return fraud easy target. Your policy should be sufficiently attractive to your customers and at the same time it should be underpinned by anti-fraud measures like returns tracking. This allows you to attract and retain customers and to deal effectively with rogue customers and outright fraudsters who may want to take advantage of your attractive policy. A good return policy should attract customers and be able to deal with rogue customers without victimising innocent ones.