Focusing on Your Customers Shouldn’t Cost You Everything
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Sep 11, 2020
People have a low tolerance for being lied to, misled, or mistreated. Once a friend or relative has done you dirty, it’s tough for that person to fully regain your trust.
The same goes for brands — building consumer trust is one of the most important aspects of your ecommerce strategy. Trust comes through building a consumer relationship on a foundation of good experiences that revolve around positive moments all along the customer journey.
In short: Earning and retaining a customer means focusing on their experience with your brand and ensuring it’s simply the best every step of the way.
However, a lot of the strategies that provide positive experiences come at a cost. The money that goes toward free shipping, free returns, free chat support, and beyond doesn’t just appear from thin air—it comes out of your bottom line.
It’s no secret that enhanced customer relationships and better experiences result in more repeat purchases and long-term loyalty, but how can online shops thrive in an increasingly competitive ecommerce space win with customer experience and not go broke doing so?
It all comes down to finding a balance between focusing on the customer and focusing on the costs to provide those memorable and favorable customer experiences. It’s about tapping into the sweet spot of a great customer journey and a healthy bottom line. It’s about setting your brand apart from the competition without sacrificing it all on the way.
Sound tough? It doesn’t have to be.
Let’s explore which ecommerce strategies lay the foundation for the best customer relationships, which end with higher customer LTV, and which can save you some dough on the way.
Free Returns: High Cost for Fat ROI
One of the most popular strategies that builds consumer confidence in brands is the ability to return products with ease, but it can also be one of the most costly. Returns will hit about one-third of retailers’ revenues according to Vogue Business and will be responsible for eating up $550 billion in 2020—that’s a bunch of bucks that could’ve gone toward profits instead.
But while that sum seems insurmountable, there’s a good reason over half of brands have already implemented this strategy.
Free returns are now table stakes in online shopping thanks to Amazon. Eighty-eight percent of shoppers say that free shipping on returns is either “important” or “very important” according to a study by Web Retailer. And it’s not only important as a customer expectation; 78% of consumers will also purchase more if free returns are a promise.
Additionally, 84% of shoppers won’t even return to a store if they had a negative return experience, such as needing to pay for shipping, no choice in returning method (in-store, pickup, or shipping), or strict return policies barring them from money back.
So while money might be heading out the door to ensure an easier returns experience for shoppers, it’s a benefit most consumers use when deciding if they’ll come back to buy again or opt for a competitor.
This comes down to the fact that this is one bet that will pay off. Brands can utilize this strategy to increase revenue — if they offer free returns, customers will probably purchase more overall, thus offsetting the cost of other returns.
Lifetime Warranties Create Lifetime Customers
Lifetime guarantees can also give consumers more reason to purchase from your store, and many brands are already offering pretty generous policies. For example, Patagonia’s policy states that refunds can be granted for up to a full year after purchase, and store credit can be given for anything beyond that.
L.L. Bean famously has a lifetime warranty for any products that are damaged due to craftsmanship or materials (although the universal warranty has been limited to one year after loads of people started gaming the system). And Manduka offers a 10-year lifetime (of the product) warranty on their yoga mats.
That’s a lot of namaste.
Depending on the industry vertical and manufacturer, warranties will cost brands anywhere between 1%–10% of the sales price. It all depends on the rate of warranty utilization, and the longer you offer a warranty for, the more likely it is your warranty will be used.
But there are benefits to making your warranty process easy — 96% of consumers say that they’ll return to a store if brands make their returns simple. Additionally, the most common priority in reasons why consumers love and trust brands is product quality.
Signaling that your product is of the highest quality and that there is an easy way for consumers to return it within the warranty period is a tried-and-true method of establishing consumer trust. Plus, offering a warranty means that consumers can let their guard down when trotting to the checkout because they won’t have to stress being stuck with a defective item and a treacherous returns process.
This is Patagonia’s Ironclad Guarantee, and it’s definitely one reason folks stay loyal to the brand.
A Deeper Look: The Cost of Customer Centricity
As a consumer yourself, you’re probably partial to the brands you shop with because of benefits like those above. As an online merchant, it’s possible to offer those same things to customers, but you might be wondering how deeply free returns and very generous warranties could cut into your profitability.
So, let’s see what it could be costing a brand like Patagonia to offer its no-questions-asked guarantee.
Earlier we stated that between 1%-10% of a store’s revenue can be eaten up by warranties, with the average sitting at 8.1%. Patagonia’s sales have quadrupled over the past decade and hit $1 billion in 2019. Hypothetically, this could mean that 8.1% of Patagonia’s sales are eaten up by returns alone, or $81 million.
$1,000,000,000 x .081 = $81,000,000
Eighty-one million dollars is definitely not chump change, and it’s more than many brands will make in their whole lifespan. So while $81MM might seem like a drop in the bucket for an outdoor industry stronghold like Patagonia, it could definitely be more than your bottom line can stomach.
And thanks to the Amazonification of ecommerce standards, offering zilch, nada, nothing to your shoppers will make it increasingly difficult to acquire, nurture, and retain any customers. Consumers are continuously on the prowl for cheap or free shipping, easy returns, and open communication and support should anything go awry.
At such a high cost, though, is it worth being bent on customer centricity?
In addition to the staggering stats above, it’s also a fact that your most profitable customers are also going to be the ones who return stuff.
These are customers who trust your brand and operations enough to order a lot of goods to try on or test out, then keep what works for them while returning the rest. A seamless process means they’ll come back again and again, racking up a higher customer LTV (AKA, revenue for your store).
We have good news, though—you don’t have to run a store like Patagonia in order to keep your customers happy. You also don’t have to lose a lot of money, either.
3 Simple Ways to Keep Customers Happy Without Going Broke
We highlighted a couple of the most popular experience enhancers that many consumers have come to expect. Free returns and strong warranties can be huge deciding factors for customers to shop with you or not, but they are strategies that can dip into revenue before adding to it.
If you’re not quite ready to put those strategies in play, here are three simple tactics you could tackle this week for next to nothing.
1. Tout Your Freebies Across Every Channel
Take any chance you can to tout that your product is of the highest quality and that there’s an easy way for consumers to get in touch with you should they want an exchange, a refund, or encounter any other issue.
Add trust badges across your website, email, or ad copy, as this messaging is a tried-and-true method of establishing consumer trust and repeat purchases. An extra icon and some copy on your website only costs a little real estate above the fold.
And even if your customer doesn’t plan on contacting you anytime soon, reiterating your commitment to resolving issues and working for their satisfaction could be what they need to see to finally make a purchase.
2. If You Can’t Offer Freebies, Make Issues Easy to Resolve
If your store is just getting started, you might not have the funds or the logistics to offer any freebies right now. No free 2-day shipping, no free returns, not even a free sticker in the box. Don’t worry, though, all is not lost.
While costly offers aren’t in the cards right now, it’s still possible to focus on the customer and provide a premium experience by making the process of resolving an issue hassle-free. Route is bent on making customer experiences easy as possible without adding costs to the merchant.
For example, adding Route to your post-purchase experience empowers customers to resolve issues with their order—like if their goods show up damaged—in a couple clicks on their own. This can keep your customer support costs to a minimum, often reducing customer success costs a whopping 18%. So while refunds might cost your customers some shipping fees, making the process smooth and customer-centric will still create trust and foster loyalty.
3. Protect Customer Purchases
Adding package protection to your post-purchase experience is another way to let customers know that their happiness is your priority. Adding Route to your strategy is free, and it lets shoppers know that if their purchase is lost, stolen, or raptured into the ether, you will have their back.
Protecting a package lets customers know you care about them and their experience with your store, which can be known to boost revenue more than 10%. Not bad for a strategy that costs nothing to adopt.
Stop Sweating the Costs of Customer Joy
While these customer-centric strategies can be costly, they more than make up for it with the benefits they provide in securing repeat customers in the post-purchase part of your customer journey.
And when you start a savvy digital transformation of your post-purchase experience, brands can keep the consumer trust without negatively impacting their bottom line.
By partnering with a post-purchase solution provider like Route, brands can simplify the final part of their customer journey. An easy return process provides customers the benefit of streamlining the refund process and help them feel secure in the process. A post-purchase solution provider can also turn any issue that arises with lost or damaged goods into profit for businesses instead of a hard-hitting cost to their bottom line.
Building trust with your consumers while not taking a hit to the bottom line can be a revitalizing investment into your ecommerce channels. Making the process easy for consumers will provide such a positive experience for them that the final part of their customer journey will encourage them to cycle back to the first part so they purchase again.