June 2, 2020

Customer loyalty, returns and the power of memories

eCommerce returns cover a wide range of experiences, usually ranging from minor inconvenience to major mistakes.

So how can retailers ensure that their customers have a positive memory of their experience, even if they ended up returning a purchase?

A cycle of psychology

Put simply, the path to customer loyalty lies in creating positive experiences at the right times. Don’t just take our word for it ­– this concept was developed by eminent psychologist and Nobel Prize winner, Daniel Kahneman in his ‘Peak-End Theory’, which explains how humans recall and interpret events.

You’d think that we simply look back on experiences as a whole and make an overall judgement, but the research shows we’re a bit less rational than that. Instead, as Kahneman writes in his bestseller ‘Thinking, Fast and Slow’, “people judge an experience largely based on how they felt at its peak (i.e. its most intense point) and at its end, rather than based on the total sum or average of every moment of the experience.”

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For some customers, their peak might be in receiving their purchase, but the final interaction with a brand might be to return it – and so this will be the standard by which the experience is judged. That’s why we built digital tools to create a positive experience of the returns process, through clear communications, a simple digital journey and better information for the retailer. In turn, retailers can sort out any problems quickly and do their best to right any problematic situations.

Doing this right sends a powerful psychological message to customers. Security is one of the most important aspects of ecommerce. While shoppers now feel much more comfortable buying goods online sight unseen, the security of knowing that any issues can be dealt with without a confusing and frustrating returns process is a powerful motivator to return next time they want to shop.

Going digital means making things visible

It’s impossible for a retailer to sustain growth when they don’t have a full grip on their consumer ecosystem, but to truly achieve this means that every touchpoint within the customer experience must be digital, so that it can be tracked and measured and refined.

That includes returns. After all, to fully understand the customer journey you also need the data on how it ends. In our experience, retailers who take the decision to go fully digital in their returns often have something of a revelatory experience. From an unrewarding baseline of working with percentages, they are quickly able to start tracking the causes of returns and customer lifetime values in a way they never have previously. Processes that frustrate or disappoint customers start to stand out, and retailers begin to have a clear (and sometimes slightly scary) view of the proportion of customers who simply ‘write off’ the experience and never come back.

Unfortunately, there is a tendency in retail to view returns as an unpleasant necessity, which leads to a lot of heads in the sand. Returns gets treated as a cost centre, outside the core focus of the business. We disagree. Bringing maximum simplicity to something awkward and annoying for customers has multiple benefits, particularly when it comes to loyalty.

If the science doesn’t appeal, let’s do the math

Creating a swift, efficient, digitally-led returns experience can create great impressions, yes, and is proven to encourage repeat business. But if you’re less interested in the psychology and looking for an immediate business case for digital returns, look at how it can chip away at your returns rate and lower your costs. Returns data can quickly pinpoint brands or SKUs that are repeatedly returned, allowing retailers to rationalise them out of their ranges.

Look at the most relentlessly data-driven retailer out there: Amazon. They’ve got a market-beating returns experience made easier with a simple digital user journey, rapid communications and tons of locations to drop-off returns to. You don’t need to have the same investment as Amazon to make this happen – you can start using the Doddle returns portal to achieve all of these things.

How about using returns data to adjust marketing segmentation? You can omit customers who cost more in returns than they create in sales, and target to your most truly profitable customers. Further, retailers can now understand the value of the return before it has even left customers’ hands, and react accordingly. For a retailer who processes a high volume of returns, the ability to adjust return shipping costs according to product and condition represents a huge potential saving. This way, resaleable and higher-margin goods can be back in stock faster, and anything else can be directly routed to where it needs to go. This alone more than pays for digitisation (especially if you get your digital returns platform completely free of charge!), but factoring in the repeat business from happy and loyal customers, improved segmentation and efficient management of SKUs? It’s a no brainer.

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