Many retailers are getting the concept of customer journeys wrong, or, rather, they have great customer journeys mapped out — they just end after the “purchase” moment. For sure, the concept of a linear path from awareness to purchase is sometimes a useful simplification. The problem is that once you have won that customer, their loyalty isn’t locked in — you need to draw them back again and again. The customer journey starts off linear, but it should end in a cycle of repurchasing.
Getting the returns experience right is one of the most critical parts of that cycle — 95% of shoppers say that how returns are handled affects their decision of whether to purchase again. With that in mind, here are five essential KPIs you can use to measure how good your returns experience is, so that you can make sure you are improving customer retention and lifetime value.
- Purchase Frequency Before Return Versus Purchase Frequency After Return
This is perhaps the most crucial test of your overall returns experience. Does going through the returns process make customers less or more likely to shop with you again?
According to Doddle’s October 2020 YouGov survey findings, if they have a great experience, 84% of customers are more likely to shop with you again, so if your returns operation is running smoothly and generating great customer experiences, you should see customers purchasing as frequently or more frequently after returning an item. However, if you find that customers who have returned an item are less likely to shop with you again, then you have a problem, and your returns experience is pushing customers out of the repurchase cycle. That all but guarantees a portion of your customer acquisition investment is wasted, every time.
- Refund Versus Exchange
Exchanges aren’t always the right option, but given the choice, they’re definitely better than a return. An exchange is a triple win: it recovers revenue, retains the customer and gives them something they want from you. Measuring your rate of exchange versus refunds issued gives you the baseline to set targets against, aiming for more exchanges over time. You can achieve that by making sure that customers get proactive communications after their purchases and by putting the exchange option front and center in the returns process. Increasing your ratio of exchanges to refunds like this improves the profitability of returns and customer experience in one fell swoop.
- Return Rate and Negative Reviews
Return rate is obviously crucial to your overall profitability, but on its own it’s a pretty blunt instrument that doesn’t give you much actionable intelligence. Negative reviews are an underestimated source of direct customer feedback and give you direction and context for your returns performance. The two don’t necessarily correlate — for example, shoppers who simply got the wrong size and returned a product are unlikely to leave a negative review (unless they feel misled by your sizing).
However, what the rate of negative reviews can illustrate is the flawed thinking behind returns strategies that aim to reduce return rates at all costs. In a simple example, if 10% of your product reviews are negative but only 5% of purchases are returned, you can infer that there is a group of unhappy customers who cared enough to leave a review but couldn’t face the hassle of returning their purchase.
No return is a good outcome, right? Well, in the absolute short term, maybe you’ve saved the cost of a return. In the long term, though, you’re probably losing that customer. Taken that way, you can imagine the cost of returns as a customer retention exercise. Of course, you should be trying to keep both the cost of return and rate of return low for the sake of efficiency, but make sure not to cut your feet off to save on the price of shoe leather.
- Percentage of Calls Regarding Returns or Refunds
Your customer service team keeps track of the issues occupying agents’ time and energy, right? That helps you fix things when, suddenly, a specific kind of issue skyrockets in frequency. But it’s also helpful as a way to measure the impact of changes in your return process. For example, one of the most immediate ways to create a better returns experience is to introduce automated communications that inform customers of their return and refund status.
A before and after snapshot of the percentage of calls and customer service contacts about refunds and returns should prove the point for you. Continually monitoring that percentage will give you a continual tracker of returns performance as it relates to your customers.
- Speed of Return
Just how quickly do items get back to you after your customer receives them? There are plenty of products where resale value plummets the more time elapses, and maximum revenue recovery often hinges on the time taken to receive the item back into stock. However, customers can be prompted post-purchase with a “we hope you love your new [item]…” communication. Or, if they’ve already booked a return, it’s a good idea to send them a gentle reminder to take the unwanted items to the post office. The faster the better, obviously.
Implementing a customer-first strategy for your returns turns the perception of returns as a cost center around. Today, returns are an essential part of a strong shopping cycle, generating loyalty and preventing customers from being put off the brand for good. Shoppers who have a positive returns experience will feel confident coming back to you, and our research shows that this plays a key part in creating loyal and happy customers. Using these most important ecommerce returns KPIs, you’ll be able to drive long-term profitability and increase customer lifetime value.
Dan Nevin is Chief Revenue Officer, Global Retail at Doddle. He joined the company in 2019, heads up the retail team and is responsible for the global retail go-to-market strategy.