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4 Tips for a Customer-Pleasing Refund Policy

  • Business
  • December 13, 2015 | Lee Polevoi

Providing refunds and accepting returns are part of every online seller's merchandising experience. What some entrepreneurs may not understand is that how they handle the return/refund process may make all the difference between retaining a satisfied customer and losing that customer forever.

As Mark Hayes at Shopify notes, "Even though the customer isn't satisfied with the returned purchase, handling the return professionally will ensure their continued patronage."

A recent survey of veteran online sellers turned up valuable tips on a customer-pleasing refund policy you can use in your own online business.

1. Focus on customer satisfaction

While no seller is happy when faced with a request for a refund, "some merchants may be short-sighted and overly disappointed, focused on the loss of a sale," notes Monica Eaton-Cardone of Chargebacks911, a risk-mitigation and chargeback management firm. Instead, she says, "consider refunds as opportunities to build the relationships that result in happy customers, time and money saved, and repeat business."

Angie Stocklin of Sunglass Warehouse urges direct communications with customers, including asking specific questions. "Will a lenient refund policy help them feel more comfortable making a purchase? Do they value your refund policy higher or lower than other key areas like price, quality, and customer service?"

Perhaps the most important question to ask is why. "Ask the reason for the return and use an analysis of the reasons to improve your inventory," says consumer psychologist Bruce D. Sanders. "Never make this inquiry a prolonged inquisition, and always have in mind that it is more important to keep a customer than to keep to a policy."

2. Establish a clear, flexible refund policy

Having a clear refund policy in place (and making sure it's clearly communicated to prospective customers) is an essential element of an overall customer-satisfaction strategy.

"Goodwill goes a long way," notes Trish Sweeney of Clipa, the "instant handbag hanger." Clipa offers a 30-day 100 percent money-back guarantee and a one-year warranty. "Customers have been so thrilled that we receive kudos on our social media sites about this," says Sweeney.

"Decide whether you will be offering full refunds, including or not including shipping in the refund, or charging something like a restocking fee with the refund," advises Sherry Holub of JVM Design. "Anything besides a full refund may have the potential to upset some customers, so you must weigh the financial cost to you vs. what an unhappy customer could cost you (for example, they could leave a bad review, never buy from you again, tell their friends not to buy from you, etc.)."

Monica Eaton-Cardone offers two useful refund policy tips:

  1. Keep the policy flexible, with no questions asked. "Many friendly fraud chargebacks are filed because the customer doesn't qualify for a refund, due to strict terms and conditions. Keeping refunds flexible allows customers to easily refund items that don't meet their expectations."
  2. Leave out jargon. "A return policy with easy-to-understand language, rather than legal jargon, will reduce confusion. Keys to simple return policies include clearly outlined deadlines, options, and fees associated with the refund."

Another valuable bit of advice: "Check to see what your competitors are doing and try to meet or exceed (from the customer’s perspective) their refund policy," says Patrick Bedford of WatchesonNet. "Articulate your refund policy in the simplest terms possible so that customers can easily understand it and know what to expect. That way, you'll always be able to meet or exceed their expectations, which is a sure way to gain repeat business."

3. Consider offering free return shipping

Shipping is another key element of a customer-pleasing refund policy. Bruce D. Sanders urges ecommerce business owners to provide free return shipping.

He describes a survey tracking shopper interactions at a pair of online retailers, one instituting a policy of free return shipping and the other, not: "Following a free return, the average customer spent much more money with that retailer -- increases ranging from 158 percent to 457 percent. On the other hand, when customers had to pay for shipping items back, the post-return spending with that retailer dropped more than 75 percent for months afterward."

4. Prevent the need for returns

Perhaps the most effective way to reduce the number of returned products is by minimizing the odds of customer disappointment. When promoting your offerings, make sure all product descriptions are as accurate as possible, with appropriate accompanying photographs or imagery. Armed with more information, online customers are less likely to buy a product they'll end up returning later on.

Avalara Author
Lee Polevoi
Avalara Author Lee Polevoi