The customer experience is no longer confined to the sales process. With the rise of e-commerce and the increase in returns, reverse logistics has become an increasingly important part of the supply chain. The quality of the customer experience in reverse logistics can significantly impact overall customer satisfaction, brand loyalty, and future sales. One sour return experience can ruin hard-won customer sentiment and brand perception. Think of all the time, money and effort that goes into acquiring a customer - developing a well-crafted reverse logistics process helps protects these investments.

Tech-Enabled, Friction-Free Returns

One of the primary ways employing technology can improve the customer experience in reverse logistics is by streamlining the return process and increasing visibility and transparency for the customer. A simplified and efficient return process can help alleviate friction points leading to a more positive customer experience. Here are some ways technology can help:

• Automated Return Authorization: Technology can be used to automate the return authorization process, reducing the time it takes for customers to initiate a return and receive authorization.
• Mobile Returns: Mobile returns allow customers to initiate returns from their smartphones or tablets, which can significantly simplify the process and make it more convenient.
• Enhanced Customer Communications: Uncertainty is the enemy of a positive returns experience. Lack of access to a return’s status can lead to customer service calls, anxious customers, and ultimately higher associated costs.  When employed correctly, technology can provide far more transparency by keeping them updated through every step in the process. This can include utilizing multiple communications methods such as email, SMS, and app-based notifications. We’ve found you can’t really overcommunicate; customers are keenly interested in knowing if and when they will be getting their money back.
• Reverse Logistics Management Systems: These systems can manage the entire reverse logistics process, from the return authorization to the final disposition of the returned product. Reverse logistics management systems can help ensure a consistent and efficient return process, improving the customer experience. Some of the specific features and capabilities of reverse logistics management systems include:
• Returns tracking
• Inventory management
• Returns processing and disposition
• Returns cost accounting and analytics
• Integration Capabilities: Managing reverse logistics end-to-end may require the coordination and integration of multiple applications. Achieving full visibility throughout the value chain is critical for communications and overall analysis and performance management.

Custom Designed – with The Customer in Mind

Another way to improve the customer experience in reverse logistics is through personalization. By personalizing the reverse logistics process, companies can provide customers with options that better meet their individual needs leading to a more positive experience and increased customer satisfaction. Much of this can be achieved through software and digitization.

• Customized Return Policies: Companies can customize their return policies based on the customer's individual preferences or psychographic factors. Analytics can be used to craft personalized return policies, taking into account factors such as customer demographics, purchasing behavior, and past returns history.

• Personalized Communication: Companies can personalize their communication with customers throughout the reverse logistics process, including email and text notifications. Personalized communication can help build trust and increase overall brand affinity.

• Customized Return Packaging: Consider providing customers with customized return packaging that is tailored to their specific needs. Of course, cost is a factor, so you’ll need to weigh the potential benefits against any increases in spend.

Challenging Conventional Wisdom

Psychology can play a role in crafting the customer experience in reverse logistics. By using the findings from rigorously designed and controlled research, companies can develop messaging and policies rooted in science to improve the overall customer experience and to differentiate from their competitors.  Some of these concepts seem like basic common sense but it can be surprising how sometimes the common belief is countered by actual research. Remembering back to my Psychology 101 days in college, one of the first things our professor asked was which statement is supported by the research: “Birds of a feather flock together” or “Opposites attract”? Both proverbial sayings seem like they could be true, but the research indicates in most cases people with similar interests will gravitate to one another.

Here are three examples of academic research relating to returns that may seem a bit counterintuitive:

• Empathy is generally thought to be important aspect of customer service and in messaging related to returns. However, in one study, the researchers found that customer service representatives who show high levels of empathy towards customers actually led to an increase in customer complaints and product returns. This result is surprising as one might expect that a customer service representative who is empathetic would lead to a decrease in complaints and returns. The authors suggest that the increase in complaints and returns may be due to customers feeling that they can manipulate the empathetic representative into granting their request. (West & Galinsky, 2010)¹

• One might assume having a limited time window for returns would reduce them overall and help protect the seller from future liability from on-going return but in a recent study the opposite was confirmed. The authors found that a retailer's policy change from a time-limited return policy to a more lenient policy allowing customers to return items at any time resulted in a decrease in the number of returns. The researchers theorized that the decrease in returns may be due to customers perceiving the retailer as more trustworthy and having a higher level of customer satisfaction, leading to fewer returns being necessary. (Liu & Liu, 2021)²

• Would purchases that seem impulsive lead to more returns? Maybe not. Researchers that studied customers who make purchases under time pressure (e.g., during a limited-time sale) are less likely to return those items compared to customers who make purchases without time pressure. This result is somewhat unexpected as one might guess that customers who make hasty decisions under time pressure would be more likely to return items. The authors suggest that the decrease in returns may be due to a psychological phenomenon known as "commitment bias," where customers are more likely to stick with a decision once they have made it. (Yildirim, & Corstjens, 2016)³

Circularity Aided by Psychology

Recommerce, or the buyback of used products from customers, is becoming increasingly popular as customers seek to reduce waste and earn money back on items they no longer need or have replaced. Companies can use psychological techniques to encourage customers to participate in recommerce programs and sell back their used products.

• Financial Incentives: Financial incentives can be a powerful motivator for customers to participate in take-back programs. Offering customers a percentage of the original purchase price, or even a fixed amount, can encourage them to sell back their used items.

• In the book Nudge: Improving Decisions about Health, Wealth, and Happiness⁴, authors Richard Thaler and Cass Sunstein discuss the use of nudges, or gentle pushes in a certain direction, to influence behavior. One type of nudge that can be effective in encouraging participation in programs like recommerce is financial incentives. Thaler and Sunstein provide examples of how financial incentives have been used successfully in various contexts to encourage behavior change, including participation in recycling programs, saving for retirement, and adopting healthy habits.

• At Reconext, our own trade-in experiences bear out another aspect of financial incentives. We’ve found participation is greatly improved when the offer is positioned around using the value of the old item to help create buying power for a new product the customer really wants. This way, the focus is really on being financially much closer to the object of desire that carries even more weight than the monetary value of the item being traded in. We’ve designed our trade-in platform to integrate directly into the new product purchase flow to maximize this effect.

• Gamification: Gamification techniques, such as earning rewards or badges that convey social status for participating in circular programs, can make the process more enjoyable for customers and encourage them to participate.

• Personalized Messaging: Personalized messaging that emphasizes the benefits such as reducing waste and earning money back, can be effective in encouraging customer participation. Companies can use data analysis and machine learning techniques to create highly personalized messages that resonate with individual customers. 

• In a case study conducted by Optimizely⁵, a leading platform for website optimization, the company compared the response rates of a control group who received a generic email against a group who received a personalized email. The personalized email used the recipient's name and mentioned a recent product they had viewed on the company's website. The results showed that the personalized email had a 42% higher open rate and a 102% higher click-through rate compared to the generic email. This demonstrates the power of personalization in improving email response rates.

• In B2B use cases, we’ve seen the effectiveness of using personalization and related messaging tactics to get employees to ship back old work devices after they have received new one. One high-impact strategy is copying the employee’s supervisor as a way of escalating for non-compliance. At Reconext, our buy-back platform was designed to allow for these types of customer designated configurations. The series of emails and communications is customized, and the rules are configured. From that point, everything happens automatically.

• Social Proof: Showcasing the popularity of buy-back or trade-in programs and the positive impact they have on the environment can serve as social proof and encourage more customers to participate.

• Ease of Use: Making the buy-back process as easy and seamless as possible can also encourage customer participation. This can include providing pre-paid shipping labels, clear instructions, and a streamlined process for evaluating and paying for used items.

Encouraging reuse of products through psychological techniques can have a significant impact on a company's bottom line, as well as benefit the environment. Financial incentives, gamification, personalized messaging, social proof, and ease of use can all play a role in encouraging customers to participate in programs to sell back their used products. By understanding the psychological factors that influence customer behavior, companies can create effective recommerce programs that improve the customer experience and drive business results.

 

The Dark Side of Reverse Logistics - Fighting Fraud

Fraudulent returns of all kinds can have a significant impact on a company's bottom line, and it is essential for companies to have measures in place to combat this issue. Fraudulent returns can also harm the customer experience, as they can result in disputes and longer processing times. We won’t get into the psychological factors that drive fraud (that could fill a whole book!) Instead, here are some fundamental strategies to employ technology to help reduce losses from fraudulent returns. Reconext offers these services for our customers, and we can attest to their effectiveness.

• Photo Documentation: Companies can take photos of the product when it is received to document any damage. These photos can help mediate disputes and provide evidence in the event of fraudulent returns.

• Package Weighing: Companies can weigh the package when it is received to determine if it is consistent with the original shipment. This can help detect instances where an empty box is being returned or where the contents have been replaced.
• Return Authorization Checks: Companies can implement return authorization checks to ensure that the return is legitimate and that the customer is authorized to return the product. This can include checks against the customer's purchase history and past return history.
• Return Fraud Detection Software: Return fraud detection software can be used to analyze returns data and detect patterns and anomalies that may indicate fraudulent returns. This software can help companies quickly identify and prevent fraudulent returns, improving the customer experience and reducing financial losses.

In summary, Reverse logistics is an important part of the customer experience, and companies must take steps to ensure that the process is efficient and positive for customers. The use of technology and psychology can help improve the customer experience in reverse logistics, from streamlining the return process to combating fraudulent returns. By investing in technology and applying psychological principles, companies can improve the customer experience and increase customer satisfaction, ultimately leading to increased sales and brand loyalty.

 

References

1. West, C. T. A., Lerman, D., & Galinsky, A. D. (2010). The dark side of empathy in customer service encounters. Journal of Marketing Research, 47(1), 34-49.
2. Liu, X., Zhang, T., & Liu, W. (2021). The Effect of Return Policy Leniency on Customer Returns: Evidence from a Retailer's Natural Experiment. Marketing Science, 40(1), 123-139.
3. Yildirim, P., & Corstjens, M. (2016). The Impact of Time Pressure on Returns: Evidence from a Natural Experiment in Online Retailing. Marketing Science, 35(3), 356-369.
4. Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving Decisions about Health, Wealth, and Happiness. Yale University Press.
5. A/B Testing Case Study by Optimizely (2017).

 

---

Sean Michaels
With over 25 years of experience in reverse logistics and recommerce, Sean has focused on creating and growing programs to recover used products from consumers and businesses with the objective of extending their useful lives. As Vice President of Marketing for Reconext, he is responsible for communicating the company's full range of aftermarket services for electronic devices to both potential and existing customers.