Thursday, April 20, 2017

Gift with Purchase to Cut Item Returns

About 95% of items returned to retailers are in fine shape. The customers most commonly say that they’re bringing back the stuff because of second thoughts about the purchase when they got it home. Even though such items are usually suitable for resale, there are still the costs of checking each item for defects, damage, or usage and then restocking it and selling it again.
     Aware of the hit to profits that item returns can cause, researchers at Seoul National University, using samples of American and Korean consumers, identified a way to reduce item returns: Offer a free gift along with the item purchased.
     This is a method you probably wouldn’t use for every purchase. But it can work well with sales of items where processing returns is especially costly or bothersome. The researchers found it’s even more effective when you allow the purchaser to choose the free gift from a few alternatives you present. The method works for two main reasons. First, the shopper believes that if they return the item, they’ll need to return the free gift, and this makes the psychological cost of the return higher. Second, the acceptance of the gift, and especially of a gift the customer selected themselves, results in a more solid feeling of ownership, and so a hesitancy to surrender the merchandise-gift pair.
     Knowing that you accept returns eases shopper indecision at purchase time, so you want to make item returns as easy as possible while still protecting yourself from financial ruin. There’s research suggesting that a free gift helps at this point, too. Adding a gift to accompany one of the alternatives facilitates the purchase decision. Studies at University of Chicago and Columbia University found that with financial investment decisions, it even works to offer a small gift with both of two alternatives because this moves the decision toward the riskier choice, breaking the tie. Consumer behavior researchers call this the “mere token effect.”
     Use the “free gift” method to augment other ways to reduce item return rates. Consulting with the shopper prior to purchases helps. University of Texas-Arlington and University of Texas-Dallas researchers identified two more factors:
  • Policies that are offer exchanges rather than money or monetary credit reduce the rates of return. 
  • Return rates are greater for retailers who are lenient about the time by which a return must be made or about allowable reasons for the return. 

For your profitability: Sell Well: What Really Moves Your Shoppers

Click below for more: 
Empathize to Ease the Endowment Effect
Dissolve Decision Paralysis
Return to Reconsider Your Return Policy

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