Returns Can Be Used to Gain Loyalty

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Most marketing efforts are devoted to achieving the sale, but customer loyalty can be won or lost on how retailers handle the returns experience. Retailers cannot afford to treat merchandise returns as solely an operational issue because returns make up a large part of an online or catalog retailer's business.


In Shop.org and Forrester's "State of Online Retailing 6.0," of the $96 billion in online sales in 2003, more than $20 billion of that merchandise was returned to the retailer. For progressive retailers, merchandise returns present an untapped opportunity to build a relationship with customers.


The returns process is a major customer touch point in the sales cycle. Returns-triggered marketing programs should be used as a powerful solution to the challenges of customer acquisition and retention, as they let online and catalog retailers extend communication with the customer after the sale through tailored outreach tied to returns.


Establishing a returns marketing program requires retailers to have an organized, "intelligent" and timely returns process. According to McKinsey and Company, customers who have their complaints resolved quickly have a repurchase intention rate of 82 percent.


An intelligent returns process lets retailers maximize the convenience of returns and communicate in a way that boosts satisfaction, loyalty, retention and future buying patterns through the strategic and immediate use of returns information. The returns process must be simple, efficient and timely so that retailers can target and communicate with the customer as well as measure the success of their efforts.


A returns marketing program needs to focus on three components: communication, promotion and analytics.


The foundation of any returns marketing program is built by maximizing convenience for customers. A Harris Poll conducted in December 2003 found that 95 percent of customers likely will shop with retailers again if the returns process is convenient, whereas 85 percent will not buy again from a retailer that has an inconvenient returns process. Establishing a simple, efficient and timely returns process is often easier said than done.


Customers often must carry their package to the post office, FedEx or UPS to weigh it and pay for the shipping from their own pockets. Then it's a waiting game: wondering whether the retailer got the package and when they should expect their refund. As a result, returns often are frustrating for the customer, resulting in loss of good will and organizational efficiencies.


Retailers must make it as easy as possible for customers to make the return. The process must be simple to understand and complete. Clear label usage instructions and information on convenient package pickup or drop-off locations should be included. A U.S. Postal Service-approved prepaid return label is the most convenient, since the USPS provides more convenient drop-off locations than other carriers.


Once the return is initiated, communication with the customer becomes essential to ensuring satisfaction with the completed process. Retailers need immediate access to information about the status of the returning package to promptly notify the customer of receipt of the package. Whether via e-mail, postcard or letter, retailers should communicate to the customer as soon as they are aware of the returned package. This proactive communication reduces inquiries to the call center and provides peace of mind to the customer that will maintain a favorable impression of the retailer.


Communication alone is not enough. Retailers must communicate the right messages to the customer at the right time. Retailers can convey appreciation of the customer with incentives such as discounts on the next purchase or free shipping. Through different incentive programs for different customer types, retailers acknowledge the uniqueness of their shopping experience. This fosters loyalty and promotes future sales opportunities.


No marketing program is complete without a way to measure its success and effect. Retailers must be able to measure customer purchases, repurchases and retention rates to determine the correlation between returns and buying behavior. The data are valuable to tailor customized offers and measure retention and loyalty. An analytics component in a returns marketing program lets retailers understand customer behavior patterns that will enable them to test marketing programs and use the intelligence to create a more compelling offer for that segment of buyers.


Investing time and resources in an active returns marketing program takes commitment by retailers, but the payoff is invaluable. The Harvard Business Review states that improving retention by just 5 percent can increase profitability 25 percent to 100 percent. Fulfilling customer expectations means making the sale only a first step. Dedication to customer satisfaction is ensuring a customer's shopping experience is enjoyable from beginning to end, from the point of order to the return.


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