Happy returns = returning customers

Maintaining a good return policy is more important than you may think.

They would rather switch than fight. These people don’t want to expend the effort it takes to complain or face the stress that goes with confrontation.

But if they don’t tell you, who do they tell? Only nine to 16 other people, that’s all. They’ll freely tell everyone else about the problem they had with the product or service they purchased at your establishment.

I recently tried to return a pair of $10 heel taps from a local shoe repair shop the day after I purchased them. I only tried them out for a few minutes before I realized they made my arches hurt. The owner refused to take them back and offered no alternative. She said it was store policy not to take back anything that leaves the store. I expressed my disappointment, and her response was, “That’s our policy.”

Let’s look at the insanity of their no-return policy. Although I had been a customer for several years, had purchased two pairs of $300 shoes, had my shoes repaired on a regular basis, and my wife and I had purchased other accessories, I was given no option of a refund or exchange. I was just left with a pair of heel taps that were of absolutely no use to me.

Research shows that one out of 20 customers with a complaint will tell 20 or more people about the problem. When you add in Yelp and other social media sounding boards, that person’s complaint can go viral in minutes.

I call that “reverse marketing.” You don’t even need a budget for that kind of marketing. It just happens naturally when you mishandle a customer’s complaint.

"Research shows that one out of 20 customers with a complaint will tell 20 or more people about the problem."

Studies show that when a potential customer hears a negative comment about the service or products you provide, it has a lasting effect. In fact, it takes an additional eight to 10 positive comments to counteract the effect of the negative one. And sadly, this is a person who has never even once been a customer of yours.
Let’s go a step further and look at the monetary effect of that one unhappy customer never doing business with you again.

Let’s say a typical customer might spend $50 with your retail establishment each time they visit. And let’s say they visit your store six times per year. So, $50 x 6 = $300 per year.

And because this is a good customer, they would normally do business with you for seven years. We multiply seven years times the $300 per year to come up with a total of $2,100. Now, you know your profit margins, so you can do the rest of the math.

My question is: Why would any business owner risk losing a $2,100 customer over one purchase? Not to mention the “reverse marketing” that’s been set into motion.

Here is my recommendation: Make sure your return policy is customer friendly. Both your customers and your bottom line will thank you.

One more thing: When I hear small retail business owners complain that they can’t compete with prices online, I give them this response: “You may not be able to compete on price, but you can compete on giving extraordinary service.” And that will be the topic of my next column.

Tom Borg is a retail consultant, speaker and author of “Making Service Count.” Reach him at 734-404-5909, tom@tomborg.com or visit www.tomborgconsulting.com.