The profitable customer is always right

The Profitable Customer - Website Large

“The customer is always right.” Although this saying has been around for more than 100 years, pretty much everyone who works in customer service knows that while most customers are always right, certain customers are often wrong.

Consider the customers who return tools, jewellery or clothing after they’ve been used. The resulting costs will either drive up the price of goods or require the retailer to cut costs for continued profitability. Nobody wins.

In the days of mom-and-pop stores when this saying was invented, customers and employees got to know and trust each other. Back then probably more customers were right. In addition, retailers could easily identify the problems.

Loss of intimacy
But with chain, big-box and online stores, the retailer-customer relationship has lost its intimacy. As a result, restrictive policies have blanketed all shoppers, rather than targeting the problem few.

Take the example of the requirement to have the original receipt and packaging and return the item within 30 days. On top of that, customers may have to stand in a long line and complete a tedious form and show ID for an in-store credit. As a customer, it is difficult not to go through this experience feeling like you have done something wrong.

This can also demoralize employees who must apply the strict policies to both right and wrong customers.

Reward profitable customers
The solution? Implement a “Profitable customer is always right” policy.

By monitoring your customers’ buying behaviours, retailers can determine who is an unprofitable customer and take steps to discourage bad behaviour. Moreover, they can identify and reward profitable customers, allowing them to shop free of restrictive policies.

Online retailers have an advantage here because they can easily track shoppers’ behaviours. Brick-and-mortar retailers can monitor customer profitability through the use of a loyalty rewards program.

The obvious rewards are the points and other perks their customers expect. In addition, they can reward profitable customers with longer money-back guarantee times with no line-ups, no forms and no hassles.

Imagine the experience of returning an item to a store, only to have someone else handle the returns process for you (a perk of your loyalty rewards card), while you are free to browse the store for your next purchase.

Imagine if your preference was to return the item through a self-serve kiosk. This could be added as an additional perk of your loyalty rewards program.

What worked for Zappos
The end result is an opportunity to remove all restrictive customer-facing policies and make life easier for your customers and your employees. Zappos made quite a name for themselves with their no questions asked 365 day return policy. They differentiated themselves from the rest by assuming the customer had good intentions when shopping and returning items, especially important when buying shoes online.

They made the return process a positive experience for customers and an integral part of their brand experience. It worked well enough that even Amazon took notice. Zappos became part of the Amazon family of companies after a $1 billion purchase back in 2009.

Fire the few bad customers
Who is going to pay for the additional cost of providing exemplary service to your loyal, profitable customers? Your unprofitable customers will. By placing restrictions on unprofitable customers, you risk losing some. But essentially “firing” customers who are costing you time and money may be good business in the long run.

If you spend less time enforcing restrictive policies and more energy on removing customer experience roadblocks to strengthening relationships with profitable customers, you can improve your bottom line. Good customers will spend money with retailers that honour and respect them at every stage of the purchase experience. That includes the experience of returning that item that just didn’t meet their needs.

Graham Kingma
Executive Vice President, Verde Group

Click to learn more about Graham Kingma

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