Issuing Customer Refunds

Create a policy for issuing customer refunds

By LaRita Heet, Freelance Writer, Journalist, IBT Designer, LMH Communications

Sure, giving money back to paying customers is never an easy thing for a small business to do. But a well-run "refunds with a smile" system can actually end up paying huge dividends in customer loyalty, repeat business and – best of all – word of mouth recommendations. Of course, some customers may abuse your system, so to protect yourself, you'll want to be clear up front about such things as how long customers have to request a concern, what condition the returned items must be in, what items (if any) cannot be returned and whether you offer cash refunds or store credit. Issuing customer refunds is as easy as 1, 2, 3:

Establish a specific refund and exchange policy
Provide a hassle-free, cheerful refund
Give the customer extra incentive to return

Lay the groundwork for your refund policy

First things first - you must establish a refund policy, let customers know how it works and teach your staff how to put it into action (or put it into action yourself). Keep the policy as simple and reasonable as possible - for your employees and customers.
Try: Customer Expressions and NFIB offer details of what should go into a refund policy, and how to review an existing policy. The Better Business Bureau offers tips on how to get your customers to commit by including a return policy.

Borrow ideas from others' return policies

A great way to customize your return policy is to check what others are doing, including your competition. Add features you like to your own policy. Return policies aren't copyrighted, so take advantage of helpful tidbits you uncover.
Try: Check policies of major retailers such as Wal-Mart and Tower Records.

Stack the odds in your favor

If someone told you that for only 2% of your sales, they could improve your customer satisfaction level to 100%, how long would it take for you to scrawl your name on the dotted line? This is what a refund policy can do for your small business - and yes, most businesses refund 1-2% of purchases. Good odds, wouldn't you say?
Try: Go to Entrepreneur to learn more about the wisdom behind promising 100% satisfaction guaranteed.

Sweeten the Deal

When returns are due to a flaw or something else that is unsatisfactory, consider also giving the customer an incentive to return - a cool freebie on their next visit, a coupon, or a $5 gift card. This goes far in restoring the customer's satisfaction level and earning their loyalty.
Try: Check out the Better Business Bureau for tips and resources on how to manage customer refunds.

Apologize: And do it sincerely. Most customers can tell the difference, and if the customer is unhappy, your business will be the loser in the long run.
Empower Employees: Teach ALL of your employees how to handle refunds. The quicker the customer's need is handled, the better.
Don't waste time: Don't make your customer stand at a counter waiting for a manager while others are allowed to go ahead of her.
Show: Post your refund policy around the store, at the checkout counters, and on contracts or other paperwork.
And Tell: Remind customers to hang onto their receipts in case they need to return the item. Train your employees to do the same.
Do Not: Tack on unnecessary "handling" or "restocking" fees - these speak volumes, telling the customer that you're inconvenienced and you're going to charge punitive damages.
Remember: A happy customer is your main priority.