Customer Chargebacks - 4 Ways to Turn Refunds into Repeat Business

Customer chargebacks send a signal that something didn’t go quite right. What you learn from failed transactions could help you turn today’s chargebacks into tomorrow’s sales, depending on how you respond.

Customer Chargebacks Shouldn’t Be the End of the Story

No retail or wholesale distributor looks forward to customer refund requests; however, momentary customer dissatisfaction doesn’t need to be the end of the story. You have an opportunity to do better next time, make things right, go the extra mile and otherwise turn frowns upside down, when you take the time to discover the root of your chargebacks and respond the right way.

Inspired by a Chargebacks911 whitepaper titled Understanding the Sources of Chargebacks, here are four strategies that can help you improve your refund policies and implement post-chargeback marketing tactics. The marketing work you do after a failed customer transaction can help you avoid a bad review and renew customer goodwill toward your brand.

4 Ways to Respond to Customer Chargebacks

1. You Made a Mistake – Now What?

20-40 percent of customer chargebacks are attributed to merchant error. Whether the cause is internal process or human error, chargebacks will happen when what the customer receives isn’t what they ordered or wanted. Here’s what to do (and not to do):

Don’t inflate customer dissatisfaction by making them feel like they are on trial. If you made a mistake, own up to it and apologize. The less combative your return process is, the more likely the customer is to accept an exchange for the item they originally wanted.

If you’ve already owned up to your mistake, apologized and tried to make things right but the customer still demands a refund, give it, but don’t give up. Allow for a cooling off period then reach out to the customer later on with a special offer. If they take you up on it, make sure you get it right!

2. Your Customer Says They Didn’t Make the Purchase – Now What?

1-10 percent of chargebacks are attributed to criminal fraud. While criminal fraud is a reality, it’s worth noting that there are times customers mistakenly think their credit or debit cards were used inappropriately when in fact they were not. This commonly occurs when a spouse or family member uses a credit card without telling the card owner, the card owner forgets about making a purchase or when the merchant name on the credit card statement doesn’t match the business name.

Make sure your card processing company lists your business name properly on customer transactions. If you believe a refund is being requested in error, follow card processor and bank dispute policies appropriately. Sometimes you’ll have to agree to the refund, but there may be instances where you simply need to clear up misunderstandings. Reach out to your customer and ask whether this is the case. Most will be appreciative that you caught the mistake and feel reassured that their card hasn’t been compromised.

3. Your Customer Has Buyer’s Remorse – Now What?

Buyer’s remorse is a common – but serious – problem for merchants, one that can even produce emotional and physical discomfort in buyers who feel like they made a mistake; such as: anxiety, nausea or breaking out in a cold sweat. It’s such a big deal that there are even laws and regulations in some industries (real estate, auto sales, etc.) where buyers have a specified amount of time to change their mind.

If you believe buyer’s remorse is at the root of a customer refund request, see if they’ll share their concerns with you so that you can reassure them or somehow mitigate their discomfort. If not, and you make a refund, reassure them that you value their business and hope they’ll consider doing business with you when they’re ready. Make it a point to reach out to them at some point in the future to see if they are ready to make the purchase they weren’t quite ready to make before.

4. Your Customer is a Serial Returner – Now What?

There are people who routinely make purchases for the emotional satisfaction it produces knowing that they will return them almost immediately. There’s even a name for them: Returnaholics. There are even a few who buy items to use for a specific purpose or event and then return them. These serial returners might not mean any harm, but chargebacks cost your business in many ways (time, accounting, restocking, re-marketing, etc.) beyond the refund.

Serial returners may need to be educated or encouraged to change their behavior. In some instances, the behavior is so costly to your business that they might need to be encouraged to shop elsewhere. As in the case of any type of business, there are some customers who aren’t good for your business.

Your response to a buyer’s refund request can set the stage for future business transactions; one in which the customer rewards your leniency by purchasing even more and telling their friends how great you were to do business with. Make sure you have a plan for processing customer chargebacks that leaves the door open for tomorrow’s sales.

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