Monday, May 12, 2008

The cost of freebies, but also of returns and complaints

Cyberspace is a buzz with the recent Tim Horton's HR and PR fiasco.

Just last week a Tim Horton's employee was fired because she gave a toddler a free Timbit (she was quickly reinstated and offered an official apology). The retail price of a Timbit is $0.15, so you can imagine how little it cost Tim Horton's to produce this morsel and subsequently how little it "cost" them (in lost revenue) to give it away. Well, many a pundit is writing about the importance of free samples or free product as a way to build customer loyalty (latest example: Globe and Mail, which was in the Life section, which I found odd). I don't disagree, and in fact, wanted to take this opportunity to talk about how the concept extends to product returns and customer complaints.

Too many companies have ridiculously strict return policies. Now, to give them the benefit of the doubt, a return policy is put in place to minimize abuse. Stores don't want too many people purchasing an item, using it to some extent, then bringing it back for a refund. Valid. But what of the negative impression that leaves? They're basically telling us that the don't trust us. Gee, thanks! They're also of the belief that the cost of returns in this case would damage profitability. Well, as illustrated in the Tim's case, the cost of poor publicity and/or a poor customer experience FAR OUTWEIGHS the cost of the returned item.

Case in point: Recently I returned a DVD I received for Christmas to HMV. Now, it was clearly written on the gift receipt that returns had to be made within 21 days. Doesn't that sound a little strict? Now I know they're trying to reduce abuse (and in this case piracy), but I had the gift receipt and the DVD was still in the original shrink-wrap, so I thought I'd give it a shot. When I got to the counter... no problem. The cashier mentioned the policy, to which I didn't really object, but quickly allowed me to choose something else for $19.99. I was so pleased that I spent $26 MORE than $19.99, then proceeded to tell 3 other people about this positive experience. There may very well be people that would abuse a more lenient policy, but do you see how this simple gesture leads to positive word-of-mouth and to INCREASED revenue (as opposed to lost revenue which they fear)?

The same applies to customer complaints. Too many companies are excessively steadfast when dealing with complaints. Just agree that they're right, even if you think they're wrong! It's not worth it!

Case in point: Just last night I was at our neighbourhood hamburger/ice cream stand ordering a completely unhealthy meal of deep fried delights when I overheard the conversation ahead of me. The customer thought she ordered onion rings. The employee was certain she did not. In fact, the employee even went so far as to say "it's not written down on this sheet" as if to suggest that it's impossible for it to have been ordered if it's not on the sheet. How do you think that customer feels? Will she be coming back any time soon? And what is she saying to her friends? How hard is it to offer an apology, make the onion rings, and say "Sorry for the delay, thanks for shopping here - see you again"?

See the difference?

Now, think about how this applies to your business. How are your policies set up to encourage (or discourage) positive customer experiences and return visits?

Have your say: I KNOW you have examples you can share.

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