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By Returnalyze on March 22, 2024

How Return Policies Shape Customer Behaviors

Using insights from granular returns data, businesses can now design return policies that promote specific customer behaviors.

When customers return products, they’re sending signals. For example, returns can signal that a business isn’t adequately describing a product, leading to unmet customer expectations. Other times, returns can signal that shipping issues are causing poor customer experiences. The point is that there’s an untapped well of information within these return signals. 

Return signals can even tell you about the impact of your return policy. Considering the drastic shifts the return policy landscape has seen over the last several years, this information is more important than ever before. Unsurprisingly, policy changes like return fees can have a big impact on customer satisfaction, loyalty, and net revenue. 

That’s why developing a return policy that considers customer behavior is vital. Plus, your returns analytics can provide much of the information you need to make strategic return policy changes.

Learn how the right return policy can shape customer behaviors so businesses can improve the customer experience and increase net revenue.

Listen to Returnalyze Chief Analytics Officer John Bowman speak about building trust with your return policy.

Customer Behaviors: Return Fees or Free Returns

It’s no mystery that customers prefer free returns because they create low-risk shopping experiences. When customer know they’ll receive their desired product or be able to return it for free, they’re more confident in their purchase. 

However, in addition to shouldering all of the cost for those returns, businesses have to be wary of fraudulent behaviors like wardrobing. Shoppers who bracket genuinely intend to keep some items, and these transactions can have a keep rate higher than 75%. Conversely, shoppers who wardrobe intend to return every item. Free returns can embolden shoppers to engage in returns abuse like wardrobing.

On the other hand, when customers know they must pay for returns, they must consider both the initial purchase and any possible returns more carefully. While that likely means fewer returns overall, it can also negatively impact sales, acquisitions, and overall customer satisfaction. This may be enough for some customers to send them to a competitor with a more lenient return policy

Nearly half (48%) of US apparel/footwear retailers saw a decrease in average order value since implementing return fees…. The same percentage of retailers saw an increase in customer complaints, 40% saw a decrease in sales, and 33% lost customers.

Attitudes Toward Return Policies Among US Digital Shoppers, Aug 2023

Insider Intelligence

Clearly, shoppers react strongly to return fees, but businesses may have little choice in the face of rising costs. When deciding whether a return policy should include a fee for returns, here are two items to consider:

  • Offer multiple return options so customers can decide whether they want to avoid a fee with in-store returns or take advantage of convenient mail-in services.
  • Consider building a dynamic return policy for tiered memberships and loyalty programs, where more loyal customers can qualify for free returns. This would reward loyal customers and incentivize less loyal customers to become more loyal. 

Customer Behaviors: Full Refunds, Exchanges, and Store Credit

Similarly to how shoppers prefer low-risk free returns, they almost always want the option of a full refund. It’s important to note, however, that a blanket refund policy may not be adequate for all scenarios. The difficulty is finding the right balance between keeping customers happy and protecting net revenue.

A simple variant exchange will satisfy shoppers who ordered an incorrect garment size but are otherwise happy with a product. Offering these kinds of exchanges is an efficient way to keep customers satisfied while protecting the sale. 

On the other hand, full product exchanges (those involving completely different products) can leave room for loss or additional sales. While it does encourage customers to continue shopping, the cost of their next transaction could exceed or be smaller than that of the initial purchase. If their next purchase is less expensive, it will result in a refund of the price difference.

What about customers who decide they simply don’t want or need a product? In this instance, it’s unlikely they’ll be satisfied with the transaction unless they receive a full refund. Offering store credit or gift cards can be a solution, but it doesn’t necessarily incentivize customers to continue shopping right away. 

If it wasn’t already obvious, a return policy's approach to refunds can positively and negatively impact customer behavior. Fortunately, analyzing returns analytics can provide important customer insights that will help you determine which return scenarios should allow for refunds, exchanges, or store credit.

Customer Behaviors: Return Policy Education

While it may seem like a secondary issue, a retailer's approach to policy education can have a major impact on customer behavior. A transparent return policy can be an opportunity to build trust with your customers, but that only works if they’re aware of the policy. 

For example, imagine that a shopper purchases a pair of athletic shoes but isn’t able to wear them for another few weeks. After realizing the shoes aren’t appropriate for their needs, they attempt to return them, only to find out that they’re a few days past the return window. 

The return policy, which the customer wasn’t aware of, requires returns to be processed within 30 days of the initial sale. Understandably, this creates a very negative customer experience. 

Now, imagine that every sales associate is trained to discuss the return policy at the point of sale. The customer would have been more likely to assess their purchase and return it within the designated return period. Even for online purchases, making sure that the return policy is easily accessible and understandable can make it much easier for customers to abide by that policy.

How Return Policies Shape Customer Behaviors | Blog | Returnalyze

Customer Behaviors: Return Policy Enforcement

While customers would appreciate it if retailers would make exceptions when they don’t necessarily qualify for a return, this can promote problematic behaviors. After all, if they received a product return exception for one item, why not try again? That’s why enforcement is so important.

A good example of this is final markdown returns. While most shoppers abide by the no-return policy on final markdowns, even a small percentage of returns means a business can lose millions of dollars. 

For brick-and-mortar stores, it’s possible that staff has been processing these transactions in spite of the policy. When the issue is localized to just a few locations, speaking with local management may resolve the issue. However, if many locations allow these transactions, additional staff training that emphasizes the importance of policy enforcement may be required.

For online final markdown returns, it’s possible that a design flaw or glitch within the post-purchase platform has allowed these types of transactions to be approved. Resolving these issues will, ideally, make it impossible for shoppers to initiate and process these kinds of returns online. 

Whatever the case may be, a lack of policy enforcement teaches customers that they don’t have to adhere to the policy. So, in order to “train” customers to adhere to your returns policy, that policy needs to be enforced. 

Optimize Your Return Policy with Behavior Insights from Returns Analytics

Before revising your return policy, it’s important to look at how your customers are responding to your current one. And there’s no better way to assess that behavior than by looking at your returns data via an advanced returns management platform.

Returns analytics can help you understand how customers are responding to various aspects of your policy, which aspects are protecting sales, which ones might be adding additional costs, etc.

Not only does the Returnalyze Intelligent Dashboard give you access to the granular data necessary for such insights, but a partnership with Returnalyze comes with step-by-step guidance and analysis from our data experts.

Are you ready to develop a return policy designed to promote specific customer behaviors? 

Schedule a demo or contact our team today.

Published by Returnalyze March 22, 2024