Generous returns, discounts, shipping policies, etc. are all great ways to attract new business and encourage past customers to come back. Unfortunately, abuse on all these fronts is rampant, leading to the question — where should a business draw the line?
Many retailers fall far along one or the other side of the generosity spectrum, either permitting a lot of leeway when it comes to abuse, or clamping down altogether by refusing any returns at all — neither being great for the business.
What is good for business — applying the Goldilocks principle and getting it just right. Do that, and abuse plummets while good trade is unaffected.
Give Them a Crumb, They’ll Take the Whole Cookie
Not to say that customers will take the cookie, but they’re certainly not shy about using loopholes they find. Our recent consumer survey found that 52% of consumers in the U.K. and 45% of consumers in the U.S. admit to abusing retailers’ policies in the last 12 months. That’s pretty significant, and doesn’t even include those who weren’t willing to admit it.
Here’s a sample of the ways shoppers admit to cheating, from the survey:
- Free shipping: 21% of consumers admit they over-order to get free shipping, then return the extra items
- Try before buy: 18% of consumers get creative and use bulk purchasing plus returns as a combo to make their own cheeky “try before you buy” service
- Wardrobing: 30% of consumers to use and then return pricey goods they wouldn’t otherwise be able to buy
In other words, this impacts a lot of your business, causing confusion and mounting costs.
Make it Easy & They’ll Keep Doing it
A lot of consumers don’t like cheating the system like this and 58% say they even feel guilty about it. It’s not a case of “abusers gonna abuse.” But as long as it’s easy, they’re not going to stop:
- 68% of consumers say retailers make it easy to abuse flexible return policies
- 58% of consumers say retailers make it easy to open multiple accounts to take advantage of promotions
The takeaway? It’s the responsibility of the retailer to put the right guardrails in place.
Discounts Drive Continued Purchases
That being said, you don’t want to overcorrect and slam the brakes on all flexibility because 48% of survey respondents said that they purchase more from merchants who have more lenient return policies, due to financial concerns. This is a common theme, also finding:
- 63% of consumers said they rely on promotions or free perks more frequently now than in the past
- 25% of consumers cited rising costs due to inflation as a motivator
- 23% of consumers couldn’t afford items without discounts
For a lot of people, times are tight. If you want to keep winning their business, you need to make your products affordable — meaning flexibility as well as discounts — because many people don’t feel they can afford shipping on top of their order or can risk paying for an item they discover doesn’t meet their expectations and that they don’t want to keep.
Clamp Down & Lose Customers
We can see from Forter’s own internal data that overly strict policies can lead to a meaningful reduction in customer lifetime value — with 16% of respondents, which is nearly 1 in every 5, admitting that they’ve completely stopped shopping with a brand that’s initiated more strict return policies.
Taking into account the diverse areas where retailers sometimes feel the need to add restrictions, from coupons and other discounts to log-in permissions, free shipping, returns and so on, we can see from Forter’s data that stringency can lead to a reduction in CTLV of up to 18% — which is especially dangerous during a time of economic uncertainty.
Introducing the Goldilocks Principle
The Goldilocks Principle is exactly what it sounds like. You want your bowl of policies to be not too hot, not too cold, but just right. That means avoiding blanket policies that treat every customer as if they’re the same, and instead differentiating between them as the individuals they are, and treating them accordingly.
Sloppy policies aren’t good, they let through too much abuse. Stringent policies aren’t good, they turn away good customers. So let’s try smart policies, instead.
Good customers should get all the benefits and smooth experience they deserve, to encourage them to return. Customers who regularly abuse returns should not be allowed to return items. Consumers who cheat only in the holidays can be restricted only in the relevant period. Shoppers who cheat with discounts but not with returns should have the relevant restrictions applied and not beyond that. And so on.
The Success of the Goldilocks Principle
The great thing about the Goldilocks Principle is that it works. We can see from Forter’s internal data that switching to smart policies can reduce loss from abuse hugely. As much as 95% of this kind of loss can be stopped — and the best part is that with smart, personalized policies, you can avoid the loss without any negative effects on good customers.
Your customers are all individuals. The more you treat them that way, the better it is for your business both now and in the future.