Create Smarter Return Policies

November 15, 2016

Create Smarter Return Policies

New research shows that offering a lenient return policy can increase the number of items purchased more than it increases the number of items returned. But in the real world, most companies impose restrictions to try to prevent too many returns. This is understandable, but companies should take a more balanced approach and be selectively lenient (or restrictive). Here are a few strategies that work:

(1) Be selectively lenient based on cause of the return. 
For example, Gap has a return policy of 45 days for any exchange but offers an unrestricted return policy for all defective products.

(2)Be selectively lenient based on time. 
Neiman Marcus offers 100% money back for returns less than 60 days after purchase, 75% back for 60–120 days after purchase, and so on.

(3)Be selectively lenient for your most important customers. 
Sam’s Club requires a receipt (an effort-based restriction) for nonmembers but not for members.

Adapted from “How to Design a Return Policy,” by Narayan Janakiraman, Holly Syrdal, and Ryan E. Freling