Should You Ban “Serial Returners” from Buying from You?
July 7th, 2009 by Bob Bly
One of my Internet marketing colleagues, GR, hates it when online buyers return his products and request a refund.
He hates it so much, that if someone does it more than once, he “bans” them from all his web sites.
That means he (1) blocks their IP address from his shopping cart so they cannot place another order and (b) unsubscribes them from his subscriber list.
His reasoning is that returns cost time and money, and he doesn’t want to waste either with people who are habitual returners of products.
GR feels that once is OK, but if someone returns multiple products from the same seller, he is deliberately setting out to cheat the seller — and GR will have none of it.
Serial returners aren’t just a problem for online information marketers. Traditional catalogers find them to be a headache, too.
For instance, there are women who will order shoes or a dress from a mail order catalog for a big event, wear them to that event, and then return them for a refund.
Some catalog marketers tag these buyers in their database, and if there are too many returns, removes their name from the mailing list.
What do you think?
Should a business “fire” a customer just because she has asked for a refund once … twice … three times? More?
Or should you just keep selling to that customer in the hopes that, some day, they will actually keep and pay for the information product they ordered from you and no doubt read, watched, or listened to before returning it for refund?
What say you?
This entry was posted on Tuesday, July 7th, 2009 at 11:18 am and is filed under Online Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
July 7th, 2009 at 11:35 am
This is exactly what Best Buy did a few years ago. They identified customers who would buy items with rebates, fill out the rebate and return the item only to buy it again the next day as an ‘open box’ item for a further discount. Best Buy ‘fired’ these customers and sent them to Circuit City. I’d say it worked out pretty well.
July 7th, 2009 at 11:42 am
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July 7th, 2009 at 3:24 pm
I think that eventually anyone who sells something and offers a guarantee is going to run into this issue. I have a friend who used to work at a bookstore, and said that there were a few customers who treated the place like a library.
Back when Gamestop offered full credit refunds on opened video games within 7 days, I knew someone who would buy a game, play it, then return it before the 7 days was up and use the credit to get another game. He did this for months, basically using the store for free rentals and sticking them with opened product. I didn’t approve, and I’m sure he wasn’t the only one. Eventually Gamestop ended the guarantee, and now they’ll only buy opened games back for usually 30%-40% of the original cost if it’s a new release. It’s always a few bad apples that spoil it for everyone else.
I’d say that 99% of the people who buy from you are fundamentally honest. But if you get enough customers, eventually you’re going to run into that other 1%. These people are a drain on your time and resources. If they do it repeatedly, it just makes good business sense to end your relationship with them.
I don’t know if I’d set the refund as low as two, though. I don’t think that two returns is enough to show a pattern of behavior. Maybe the copy gave the person the wrong idea and it wasn’t what they wanted after all. Or maybe they just accidentally ordered the wrong thing. I’d probably take it on a case by case basis.
July 7th, 2009 at 4:00 pm
I feel that as an marketer it is tricky business firing customers. The time and cost have to be figured in but after just two returns like your friend mentioned is a little much. I recently bought a coffee maker from Target and when I got it home it was broken. So I returned it for another one, The second one turned out not to work. So I went back a third time to buy one from a different manufacture. Should I have been penalized by target?
So for me it depends on how you define habitual in terms of returns.
July 7th, 2009 at 4:14 pm
I think it ultimately depends on the size and identity of the company. REI (recreational equipment inc.) is a very successful company with a very liberal return policy. To the point where some have nicknamed them ‘Return Everything Inc’. Do some abuse their openness? Of course. But they’re a smart company who knows that the trust they create with most, honest people far outweighs the few individuals who use and abuse.
They will keep selling to the “rotten apples” not because they think that they will have a change of heart. They won’t. They do it because by NOT turning them away, they are simultaneously getting more customers.
This can work well for a large, established company with resources to spare. With smaller ones, probably not as well.
But another factor to consider is the ‘identity’ of the company. What do I mean? REI has built their image as a wholesome, down-to-earth outdoors equipment store. Their return policy fits perfectly with their company’s vision. To the extent that most potential REI customers would never really consider ‘cheating’ the policy. Other companies may not have that same reputation or corporate identity.
Reminds me of the “Broken Windows theory”. If the windows are fixed and the building is clean, people won’t commit crimes there. If not, petty thievery will quickly lead to major crime.
July 7th, 2009 at 8:01 pm
On a technical note, online merchants need to exercise some care in blocking IP addresses, because a single public IP address may represent a firewall or proxy behind which many users may be hidden, or a dynamic IP address which may be reassigned to other users.
July 7th, 2009 at 10:21 pm
I think you have to look at the overall relationship with each customer. A customer who buys a dozen products and returns two is quite different from one who purchases twice and returns twice. It would be unfortunate to terminate a good customer without at least trying to find out what’s going on.
Also it’s important to analyze whether one product or promotion campaign might be generating a larger than usual number of returns. The problem might not be just a cranky customer.
If returns are above average, maybe it’s time to do a quality check on the production, the delivery process, etc. For example, I purchased an audio program from two of my favorite blog experts last year. This was probably the 4th or 5th product of theirs that I had purchased, but the audio quality was so over-compressed that it was almost unintelligible. Plus the guest they were interviewing was a complete idiot. The product was not nearly up to the level of quality they normally offer. I never got around to returning it, but I bet they did get a lot of returns and complaints because they discontinued it soon after. Don’t beat up the customer if a dud slips out the door.
Also consider whether the email offer or landing page might be confusing. A customer who is multitasking or tired might not read every line in 17-screens of long format copy. I once purchased one of Bob’s products thinking it was an ebook only to realize later that it was actually a CD set. Doh – user error! Sometimes when an author has a large number of similar products with similar titles it can be difficult to be sure whether or not you’ve already purchased a specific one if you aren’t in your office or at your usual computer to look it up. It is especially confusing when the author is testing a new email or landing page for an old product.
And anyway, isn’t offering a guarantee then penalizing a good customer for asking you to honor it counterproductive? I’m a big fan of the author Bob is referring to who cuts customers off for returns. I’ve purchased and enjoyed several of his products but must consider each purchase very carefully because I know the guarantee has strings. What if I accidentally purchase a duplicate item or an item turns out to be too similar to one I’ve already purchased? What if it’s too advanced or too basic for my specific needs? If the guarantee isn’t really risk-free, won’t customers to err on the side of caution? And isn’t the point of offering a guarantee to entice them to err on the side of action instead?
In the end, the key to making a good decision is to have good customer relationship data and a good measure of lifetime value.
July 8th, 2009 at 8:37 am
Banning a customer because they take advantage of a money-back guarantee more than once (meaning twice?) is unconscionable.
It might not sink to scum of the Internet status assigned here not long ago to that seller of defective air rifles and his nearly impossible return policy — but in my book it sure comes close.
Banning any customer is probably not good business.
Limiting access to a privilege such as a refund in order to stop abuse is perfectly reasonable. If the abuser then decides on his own not to remain a customer, that’s his choice.
But using a privilege once or twice hardly qualifies as abuse.
July 8th, 2009 at 9:25 am
The small firm of a lawyer friend of mine operates according to the following MO. Once a year, the associates sit around a conference table, and each associate submits a list of clients who are a royal pain. These are ungrateful clients who chronically complain and take up a great deal of time.
On a second go around, each associate submits a list of names of clients who pay poorly.
Any client who manages to make both lists is summarily fired by the firm.
This is a fine discipline — one that could serve as a model for many kinds of businesses.
July 8th, 2009 at 9:43 am
Ken: have you been a merchant yourself or just a consultant? From a merchant’s point of view, if someone orders five products from me on five different occasions and returns all five for a refund, I do not think I want to continue serving them. And I think my decision to cut them off is good business. Do you really disagree?
July 8th, 2009 at 12:36 pm
Bob:
No, I haven’t been a merchant.
And I agree that five returns out of five purchases is abuse of the refund privilege, indicating that the person is not an honest or desirable customer.
If it is not technically possible to tell the customer upon issuance of the refund or during the next ordering process that he’s allowed no more returns, then I can see where cutting him off may be your best and only option. I fully understand that you’re not losing anything by getting rid of a customer who essentially never pays.
But please understand that the original post didn’t necessarily describe this level of abuse. It said GR cuts off customers at more than one refund. More than one could be as few as two. And I don’t know that two clearly constitutes serial returning.
Maybe you and GR know that. I gladly defer to the experience of people who have done things that I haven’t. If GR’s experience tells him that any return over one is most likely going to become serial returns, then who am I to argue with his experience?
Underlying this whole discussion, however, is the assumption that what’s being sold is actually good, worth the price, and fairly represented in its marketing.
But what if a reasonable person may reasonably come to the decision that it’s not?
If I bought one of GR’s information products and decided after reading or listening to it that it was hokum, I might well request the promised refund — with the expectation that if I decided to give him the benefit of the doubt and order something else from him, that my business might still be valued.
It seems that expectation would be unfulfilled.
Which is why if it is technically feasible, I favor any approach that allows the customer to decide for himself that he doesn’t want to order again.
July 10th, 2009 at 11:42 am
Returns cost money…not just the actual cashflow associated with paying the customer, but more importantly the cost of the seller’s time.
“2 returns and you’re out” is a reasonable policy, although I would also consider the total number of purchases by the customer.
July 24th, 2009 at 5:47 pm
I have been a long time customer of L.L. Bean (since 1979) and recently I had to return items (on the same original gift card) three times. Finally they gave up and just gave me a check. I guess they are telling me to get lost.
But here is the problem. When I ordered clothing from L.L.Bean back in 1979 I could always guarantee that I would absolutely love the product. Now they sell all sorts of junk (for a lack of a better word that starts with ‘cra*’). If they sold good clothes, they wouldn’t have to worry. The Gap did the same thing this past ten years. There was a period where I could also count on liking everything they sold. But rot so today. (Yes, I am a prep from New England.)
I think if online retailers are going to get snooty about returns, they better make good products or at least don’t hype them up so much. They should say something like, “Hey, here is a pair of pants. You might hate them or you might not. Some people think they stink. No Returns.”
I think businesses who run their businesses like GR are idiots. The people that return items because they are trying to scam the company are a really low minority, like less than five percent. That’s the cost of doing business. I run into these retarded business owners all of the time. If they get more than two spam e-mails a day, they automatically change their contact info on their web page. Too stupid to be true. Being in business is a hassle, but don’t alienate your customers.
August 2nd, 2009 at 9:35 pm
One of the biggest customers at my last job was intolerable. They repeatedly short paid and paid late, made more claims than all other customers combined that merchandise was defective, etc. They were stressing everyone out, and just barely profitable-so we fired them.
Stress is time. Time is money. Any policy that deals with thousands of customers has to make some compromise-whether it involves spending that much more time, allowing customers to get away with genuine bad behavior, or penalizing some good customers. Whatever you pick should be consistent with your image.
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August 20th, 2009 at 1:58 am
I suppose everyone applies different 80/20 rules to refunds.
4 hour week Tim Ferriss said he “fired” stressy customers because they ate up a lot of his time and lifeforce without improving his profitability.
If you can still make enough money to survive, then as a seller, I think you have a right to decide if you want to continue a commercial relationship with perennially troublesome customers.
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