Returning goods can be a real headache for an online store. Because for each refusal, in one form or another, the seller has to pay.
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- How the seller can benefit from product returns
- 1. During the refund process, there is a possibility of cross-selling
- 2. The refund effect is possible only if you expect to lose money
- 3. The refund effect is applicable to any product categories
How the seller can benefit from the returns of goods
Most strategies for increasing business profitability are tied to various tools designed to reduce the number of returns and increase the percentage of effective sales.
As an example, we can consider the development of a global strategy to inform the target audience about the features of products and the opportunities that it provides for consumers. If your customers know exactly what they need and how to achieve it, then there will simply be no need to return the goods.
Cross-sales implemented into the funnel at the moment of the return of the goods are much more effective.
From the point of view of consumer psychology, the money that he receives in the process of canceling the purchase has already been lost to him, which means that their other use will be much less painful.
If a person decided for a long time to purchase an expensive product, but was forced to return it, due to certain circumstances, then he will again become a “hot lead” at the time of return.
Associate Professor of Marketing at the Rotman School of Management, University of Toronto, Chang-Yuan Li and Professor of Marketing and Honorary Member of the Faculty of Everett V. Lord, Questrom School of Business, Boston University, Carey K. Morevage conducted extensive research, during which it turned out the following:
- People believe that they have already lost the money that they can return as a result of returning the goods.
- The probability of making a repeat purchase of the product, in case of a refund, increases by 2.5 times, in comparison with ordinary purchases.
In other words, due to the increased purchasing power caused by the process of returning the goods, it is possible to significantly reduce the costs of organizing this very return.
Based on this information, three logical conclusions suggest themselves…
1. In the return process, there is a possibility of cross-selling
It should be understood that as soon as the money is in the client’s bank account, he will cease to be a “hot lead” and will again begin to consider them his property, which means it will become difficult to part with them again.
A very important component of the cross-selling strategy is the need to stimulate fast conversions. Without an explicit mention that the buyer’s money has been lost, you will no longer be able to achieve the same effect.
Accordingly, as soon as the returned money gets into the account and is combined with funds from other sources, they are no longer perceived as lost, and their intended purpose is removed from a person’s thinking.
According to the statistics of the study, the probability of purchasing a cheaper product, in the process of making a refund for an expensive purchase, increases significantly. But as soon as the funds have been returned to the account, the conversion rates return to normal and stop at the level corresponding to new customers.
Large trading platforms are already actively using the results of such studies. For example, Amazon automatically offers all its customers who return goods to purchase a gift card. In case of rejection of the offer, the refund is transferred to the account.
Offering other products instead of making a refund is an effective long–term strategy. After all, this way customers will get their funds back faster, albeit in a different form.
2. The refund effect is possible only if you expect to lose money
The essence of the return effect is that the customer must make a meaningful purchase based on their own problems and needs. As a rule, this means that as a result, the product does not meet expectations due to defects in production, any defects or other problems. In other words, the person still needs the product and the return indicates inadequate quality or insufficient consumer awareness.
Thus, you will not be able to stimulate the return effect through samples or demo versions of the product. When a person orders two pairs of shoes of different sizes, and returns one of them after fitting, there is no opportunity for cross-sales due to the fact that the buyer does not believe that he has lost the money spent.
3. The return effect is applicable to any product categories
Due to the fact that the money spent seems lost to the client, products from fundamentally different categories can be used as counter-offers. This leads us to the idea that a wide range can be a good help when it comes to the effective operation of the return effect.
Any options for additional sales or exchange greatly benefit in the process of organizing cross-sales. They lead not only to lower return costs, but also increase the loyalty of the audience, its involvement in the process of interacting with the brand and increase the average check.
For example, Loop Returns successfully helps the Shopify project in organizing the cross-selling process during the return of goods. As a result, it is possible to save about 28% of the potentially lost profit.
Today, you can still observe less pragmatic approaches to organizing the return process, such as increasing transaction costs. Brands are trying to stop refunds by charging a commission from their own customers. But this leads to the fact that most buyers never interact with the brand’s materials and products again.
Therefore, instead of trying to shift the problems associated with the return of the goods to the consumer, do your best to benefit from this process for both parties. Then the customers will be more satisfied, and you will earn more money.
Good luck!