Benefits of a Refund Policy for Customers

refund policy

Photo by Polina Tankilevitch

“Free shipping both ways, overnight shipping upgrades and a 365-day return policy – is not an expense.” – Zappos

A refund policy is among the top features for customers. It’s a deciding factor, whether a customer would choose to buy the products of a company. A lucid, written, and highlighted refund policy provides customers with the confidence, security, and trust that they would receive exactly what they ordered. If they are not pleased with the product, they can return it hassle-free. Companies should focus on providing the best customer service. They should remember that serving customers does not end after making a purchase. A clear and robust refund policy for customers is part of the service.

As mentioned, even though companies hate when customers use it, they must honor the customer’s wishes. A customer may want to return a product for a variety of reasons, including getting a better rate from elsewhere. It is the job of a company to accept that. Most companies, however, fail at allowing returns or making the return hassle-free. It leads to customers feeling irritated, cheated, and vowing never to shop with the company again. Companies can use tools to ensure that they deliver the right information to customers. An example of such a tool is interactive decision trees.

It helps in making a buying decision

According to a survey, at least 91% of customers revealed that the refund policy for customers is a decisive factor in making a purchase. It makes sense, therefore, for companies to have a well-drafted return policy. It can attract and retain customers. Having this policy lets customers know that the company is serious about putting it into action. Also, the company will not go back on its promise of taking back goods that customers are not satisfied with.

It makes sense to place this policy on brochures, customer receipts, websites, and even social media pages. It can also include what they need to provide if they want to return the product. A robust refund policy for customers is essential both for online and real-world stores. It’s even more critical for online shoppers, since they buy products in good faith, based on pictures and descriptions given by the company. A fair and honest refund policy for customers is appealing and enticing for online shoppers.

It’s a company’s expression of confidence

A refund policy for customers is actually an expression of confidence on the part of a company. It shows that the company knows that its products are top quality. There is a slim possibility of anything being wrong with them. Such a policy is also a great marketing tactic. Companies must not see it as a burden and an expense (as elucidated by the policy of Zappos).

In fact, a strong and well-managed refund policy for customers can actually raise engagement. It can lead to loyalty, resulting in more buys and an increase in profits for a company. Of course, returned items do cause losses to a company. Research shows that companies spend more than US$100 billion annually on the administration of returns. This translates to a loss of about 4% every year. As companies grow and expand their range of products, they also gain more customers. This means more goods are bought and returned.

Entices customers to buy

Smart companies actually use their refund policy for customers to entice them into buying goods they might not otherwise buy. Liberal return policies are inviting and welcoming for customers, who in turn tend to become loyal to such companies. A return policy is a seal of trust. It’s can remove the initial apprehension of buyers, encourage them to buy repeatedly, and spread positive word of mouth to others.

Companies, contrary to belief, can actually improve and strengthen their business through a robust refund policy for customers. It is a guarantee of quality. Companies that do not provide such assurance are less likely to gain customers. The fact is, there are too many companies today and a range of products.

Customers have a range of choices and would rather buy from companies that offer better policies and inspire trust. Of course, companies need to remain mindful and vigilant of ‘serial returners’. Those people who return items too frequently, causing unnecessary losses and inconvenience to a company. It is the job of a company to sift malefactors from genuine buyers. Those who could actually have a problem with the product.

Customers know what to expect

As more customers continue to show their preference for companies with robust policies, including a return policy, companies have no choice but to comply. Customers expect that conditions under such a policy, be clearly defined and mentioned. For example, the time limits to return or other such conditions. The fact is, an increasing number of customers want such a policy. They expect the guarantee from companies that the products they order would be the products they receive.

A company that is confident in its products would have no trouble offering a refund policy for customers. In turn, it gives customers the confidence to buy and keep returning. A return policy should be one of the first policies a new company should put in place. The policy must be in writing and part of the company’s business documentation. It ensures that customers know what to expect, and be at peace when shopping with the company.

It guarantees that a company cares for its customers

When putting together a refund policy for customers, the company must remain aware of the legal implications too. A business may put in place a policy according to the laws prevalent in the area of operation. However, it would be sensible to remain aware of the laws of the countries the customers reside in. Laws vary, and rather than getting into legal tangles, it would be prudent to plug all loopholes at the start.

Irrespective of the laws, a refund policy for customers should make it easier for customers to buy. It should be a guarantee to customers that the company cares for them. It is committed to ensuring customers receive quality products and services. Despite the best efforts of the company, if customers are not satisfied with the offerings, they should be able to return whatever they bought in a swift and efficient manner.

Importance of a refund policy for customers

The truth is, companies that ignore the realm of returns and refunds would be missing several opportunities to create new customers and forge stronger bonds with existing ones. Customers view companies that have friendly policies, with trust and are more inclined to stay with such companies. They grow to be long-term customers and buy repeatedly. It is worth the time, effort, and money it takes to keep customers happy.

A refund policy is one of the top ways to do so. It is an important and inextricable part of service excellence. We know that customers view service as the differentiator between similar companies and products. Therefore, it makes sense for companies to strive continually to enhance their service levels.

Final Thoughts

A company should remember that customers become even more profitable when they stay longer. But, they only stay when they are sure they can trust a company. While there may be some challenges in implementing a refund policy for customers, putting it in place helps to increase engagement. It also draws customers towards the company.

This adds to the long-term value of the customer, who in turn, would let others know of the great service and experiences the company provides. Gaining customers through word of mouth is possibly one of the best and most efficient ways to increase business. Does your company currently have a refund policy for customers and is it prominently displayed?

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