Adapted advice from the Experience This! podcast with Joey Coleman and Dan Gingiss.
When it comes to your company’s return policy, when is it time to say that enough is enough? In episode 27 of Experience This!, a customer experience podcast series, hosts and CX experts Joey Coleman and Dan Gingiss discuss the unique ways that brands deal with customers who take advantage of their return policies.
Major monetary losses
Dan and Joey begin their discussion on return policies in response to a recent announcement by clothing and outdoor recreation equipment retailer, L.L.Bean, limiting their longstanding lifetime return policy to a one-year return policy, with proof of purchase required.
“According to the company, the abuse and fraud had doubled the number of returns that the company had seen in the past five years and was costing them over $250 million,” said Dan, who also describes cases of abuse of the return policy in which shoppers purchased second-hand L.L.Bean goods from thrift shops or found goods in trash bins, then returned them to the store for a refund.
Though it seems clear that L.L.Bean had to take an action to prevent further fraud and monetary loss, Joey didn’t feel that the action taken was a fully-accurate representation of the reputation the brand has built over its 100+ year history. “I do think there might’ve been some other ways for them to handle it, but again, I empathize with the fact that they were losing $250 million over the last five years on this type of kind of abusive fraud.”
A bad fit
A fan of the “fire the customer” approach, Joey mentions his work with Zappos.com, and a conversation that he had with Zappos CEO, Tony Hsieh, regarding how he handles the small percentage of customers who take advantage of the online shoe retailer’s popular one-year return policy.
Hsieh stated, “Yeah, look, the fact of the matter is there are some people that abuse it. We track it internally in our system and once they reach a certain threshold, which is a secret, but it does happen, once they reach that threshold, we tell them that they’re not welcome to be a customer anymore and we just kind of had them exit our business.”
Gaming the system
So how does a brand build a fair return policy when the vast majority of customers benefit, yet a small percentage exploit it? Dan relates the issue to his past experience with Discover’s credit card rewards program. “You have a few people taking advantage of the rewards program in a way that frankly makes the whole program more expensive, and therefore, by definition makes it less valuable for everybody else.”
There may not be an easy answer to preventing gamers from cheating the system, and there may always be a select few who take advantage. Joey’s advice: “I think the moral of the story here, at least for me, is when you need to make these sweeping types of policy changes — and I’m sure they spent a lot of time thinking about it — consider the move that gets it going in the right direction even if it doesn’t completely solve the problem.”