Posts Tagged ‘customer service’

When a manufacturer and retailer meet to discuss the selling of product, often the subject of returns comes up. The management of customer returns is as much a part of selling most products as shelf space allocations or package design. The methods that can be used to reduce the number of consumer returns are less often discussed than the policies and procedures used to govern them. This is unfortunate because the best way to reduce the cost of returns is to reduce the number of items that consumers present for return. This can and should be accomplished by education, precise, easily understandable instructions, and a common sense approach to meeting the needs of consumers. The practice of producing ever more strict returns policies will only turn off customers and, in the end, reduce sales. Retailers have proven this over and over again.

Let’s look at a few best practices that a manufacturer can use to help consumers avoid the need to make a store return.

• Helpful packaging, if the item needs to be assembled, let the picture on the carton be one that shows the whole unit, after assembly, in a clear way, hopefully from more than one angle. If the loaf of bread that the bread maker produces is round, don’t show a picture of a rectangular loaf of bread on the package.  Remember to use the package as your first line of defense against returns and your first opportunity to educate the consumer about your product.

• Instructions and package inserts, be certain that they are accurate and easy to understand. Do not let the engineers write, proofread, and approve the instructions. By all means try them out on executive assistants, spouses, warehouses workers or even an executive or two. Make sure that there are pictures that accurately reflect how the pieces fit together and how the unit will look at various stages in the assembly process.If it is a consumer electronic product, be certain that all the connecting wires or ends are color-coded and that the wires are bundled when possible. If it is possible to label parts or wires with a letter or number, by all means do so. Regular folks find that to be of great assistance in assembling a product. Note those facts in the instruction manual. All instructions and inserts should be written in multiple languages.  Use a brightly colored insert to ask consumers to call your 1-800 technical support line before returning the product to the retailer as well as printing it in multiple places in the assembly instructions themselves.

• Have an 800 technical support line.  The number should be on all instructions and box inserts that are available to the consumer. In large, clear fonts specify that customers must call the technical support line before returning the item to the retailer. The support line should be staffed when your customers are most likely to need it. That means evenings and weekends. This is the time when most of your customers will be assembling your products. It is always amazing to me when I see a support line open from 9:00am to 4:30 pm, Monday thru Friday. Make sure that the people who answer the phone can plainly speak the language. I know that overseas call centers are a popular means to control costs but when your customers are calling your help line they are generally already frustrated with your product. Do you really want to give them another reason to be upset with your company? Call the help line yourself, on different days of the week and at different times of day and night to see what kind of service you get.

To summarize, look at the ways to reduce store returns that have the most positive effect on consumers.  You will quickly see that making effective use of your packaging, instructions, inserts and 1-800 tech support lines are the most cost effective method of improving customers satisfaction and reducing product returns. These methods are time-tested ways to make the sale stick and keep customer returns to a minimum.

Aftermarket Services have been in high demand for a number of years now.  With the explosive growth in consumer electronics and offshoring of many factories, Aftermarket Service providers have seen demand skyrocket.  According to Livingston Partners, the Aftermarket Services sector has grown over 20% since 2006. Furthermore, they expect the Aftermarket Service sector to keep on this growth trajectory for the next five years. While demand for Aftermarket Services has been strong for quite a while, the service providers are still a fragmented lot with no dominate player emerging as the “Go-To” Aftermarket Service provider of choice.

Aftermarket Services traditionally include returns processing, repair and refurbishment services, and end-of-life services that include recall processing and product recycling services. Over the last few years, however, Aftermarket Services have expanded to include warranty management, customer service, and comprehensive reverse logistics programs.

Due to rising costs and pricing pressures retailers, distributors, and OEM’s have looked to outsourcing Aftermarket Services. They outsource because of a general lack of expertise in the services needed and to limit potential liabilities. There are other benefits but for the most part, companies outsource Aftermarket Services because the service providers can provide the services for a net lower cost, with lower capital requirements, and a higher quality result.

The question remains to be “Why hasn’t a dominate Aftermarket Service provider emerged?”

We think the answer is because of the wide variety of services and sectors that would be considered Aftermarket Services. There are a number of 3PL’s that offer returns processing but these services are often no more than gate keeping processes to receive and ship returned goods.

There are many companies that repair and refurbish aftermarket goods, but these companies are usually narrowly focused on a limited number of categories.  Most repair and refurbishing companies operate on a local basis and do not have the infrastructure required to handle the large volumes that come with a comprehensive nation wide program.

Few reverse logistics companies understand end-of-life processes at all, much less have comprehensive solutions they can take to the market.  Going beyond these three basic Aftermarket Services into the newer solutions such as warranty management, customer service, or comprehensive reverse logistics is a bridge to far for the Aftermarket Service providers of today.

There are a number of 3PL’s who are looking to expand their services and develop differentiating services.  The market is looking for a service provider that can provide comprehensive Aftermarket Services.  When the two intersect, growth and prosperity will abound for both. The question is “Is there any provider out there who has the vision and the capability to be the dominate Aftermarket Service provider?”

Anyone who has ever worked with me will tell you that I am a gadget guy.  I love technology and pride myself on being an early adapter.  I have also spent the last quarter of a century in the field of reverse logistics.  These two passions give me a unique appreciation for how companies deal with defectives, returns, and customer support.

A few months back my wife bought me a Kindle and it has been fantastic.  It is one of the best new gadgets to hit the market in the last ten years and many believe it will ultimately make traditional brick and mortar book stores obsolete.  For me, it already has.  While on a business trip last week, however, I was going to use it and the only thing that would come up on the screen was “Your Kindle Needs Repair Please Call Amazon Customer Service at 1-866-321-8851.”

Being addicted to reading, it was critical for me to get this resolved immediately.  I called the number and expected to have some operator walk me through a diagnostic maze that would hopefully reset everything back to what it was.  I must admit, I was not expecting this call to go well and was ready for a fight. However, when I reached Technical Support the response was much different than I had anticipated.

“Sir, I’m sorry you are having trouble with your Kindle.  I am going to overnight a replacement to you right now.  You will receive it tomorrow. Please put the defective one in the box with the shipping label on it and return it sometime in the next 30 days.  I will send an email with these instructions and my phone number if you have any questions or issues.  Sir, please be sure to return the old Kindle within 30 days or we have to charge you for the replacement.” I had two emails within minutes.  One was almost an apology with instructions and the other was shipping information.

I was blown away.  No hassles, no questions, no push back, just great customer service.  Studies have found that customers who find the returns experience unpleasant do not come back 85% of the times.  Studies have also found that customers who find the returns experience pleasant will return to shop again 95% of the time.  As for me, Amazon has a fan who will not only be a loyal customer for years to come but will tell everyone they meet about their great customer returns process.

Is your customer returns experience at the same level as Amazon’s?  If not, you have an opportunity to dramatically improve customer satisfactions which will lead to more sales and profits.

In a recent study published by The Aberdeen Group, 36% of retailers plan to use some form of automated self-service tools within the next twelve months.  In addition, 58% of retailers have a self-service transformation strategy in place to be executed over the next two years.  The study found that retailers are going to focus their efforts around automating the following:

• Implementation of self-service product information options
• Upgrade store life cycle management
• Execute multi-channel selling at store or business unit
• Implement customer self pay options

There is a bevy of labor saving reasons for the push to automate the front end of retailing.  However, like many improvements there will be some customer push back that the retailers and by extension their manufacturers will have to address.

Continuing to reduce the amount real human interface with the customer will only heighten the importance of what little human interaction is left in a store.  One of the last and most important customer interface points will be the returns desk.

The return desk is the one place in a retail store where an organization can snatch victory out of the jaws of defeat. However, for many stores their service desk is the best marketing tool their competition has.  As the purchasing process is automated, I suspect that return rates will increase, not because of the automation but because of the customer.

How many people do you know that actually take the time to figure out how to set the clock on a DVD player?  When was the last time you read all the fine print on an item you purchased?  Automating the store side of a purchase makes sense but buyers will still be the same people coming into the store that on average, have a sixth grade reading.

All of these factors will make the returns policy, returns process, and service desk employee training critical.  As companies develop the next generation of retail POS systems & layouts, they must invest in the returns part of the business which accounts for over 8% of all purchases today.  Return rates for online retailers are typically triple the rate of brick and mortar stores.  The drivers behind the high return rates for online retailers will drive higher return rates in the brick and mortar stores as they adopt similar automation and customer service interfacing processes.

Are retailers going to address the new drives behind customer returns from automate store processes?  Also, are they going to invest in resources and training returns desk employees?  Are retailers going to redesign their layouts to accommodate returns volumes that could double or triple as they automate store sales processes.  It comes down to the old saying “Failing to plan is planning to fail.”

In today’s Podcast Curtis Greve shares three tips that can help improve returns processing; improve relationships with key vendors, suppliers, and liquidators; and increase the bottom line contribution of your reverse logistics program.

Do you know how to eat an elephant?  One spoonful at a time.  Curtis will share his experiences and time tested best practices that will help you improve, one step at a time.

Like Alan Weiss says “If you improve 1% everyday, in 70 days you will be twice as good.”  Here is three percent to help get you started.

The Reverse Logistics Podcast

Your host is Curtis Greve.

Today I am launching my new web site under the new company name of Greve Consulting, formerly known as Metreks.  The focus of my practice is to help companies develop their returns management, aka reverse logistics capabilities.  Viewers will find a lot of useful information on returns including the Reverse Logistics Podcast, which will feature industry leaders from the world of reverse logistics, and my blog which is packed with articles and information to help service providers, manufacturers, retailers, and liquidators make more money.

Register to get the blogs sent to your desktop automatically or save www.GreveConsulting.com as a favorite on your browser.  Your comments, questions, suggestions and feedback are encouraged.  I will use your feedback to improve the value delivered from the site.

Check in from time to time to see what is new.  For example, you might want to check out The Cost of Doing Nothing.  This is a form you can fill out to find out how much opportunity you and your company have in developing your reverse logistics capabilities.

Whether you call it returns management or reverse logistics, it’s all about improving returns and maximizing profits.  I hope you enjoy the new site and get a lot of value out of GreveConsulting.com.

Companies outsource supply chain operations for many reasons. Some need quick expansion and don’t have the manpower nor the infrastructure in place to expand as efficiently as outsourcing. Others are looking to cap exposure to worker comp expenses, inventory shrinkage, or hiring costs when starting up a new operation.

All of this can be done by outsourcing supply chain operations to a qualified third party operator (3PL). However, the key to achieving the goals that justified the decision to outsource is to ensure you have level of service (LOS) measures, budgets, and the other metrics in your contract that will result in the desired financial results. These goals and the strategies used by the 3PL must be in alignment and support the customers goals and strategies. Contracts must be written to ensure that success for the 3PL is success for the customer.

Just about every outsourcing relationship that goes sour, does so because of one of three reasons. Often the relationship fall about because the contract terms were not in alignment with the original RFP and the final response from the winning 3PL. The outsourcing party wakes up one day and their costs are higher and their customer service is worse than before they outsourced. They call up the 3PL and they are told that more can be done, but it is out of scope and will cost more money.

Many companies, new to outsourcing, don’t include key metrics in the contract. Often they don’t have good benchmarking data for items such as damage rate, inventory shrinkage, annual inventory turns, and thru put numbers to ensure they are getting what they expected. These details have to be carefully spelled out along with who will be responsible for the associated costs if the benchmarks are not met.

Another reason outsourcing contracts fail is that the contract was not flexible enough to address the real world market conditions and one of the parties was put in an untenable position as a result. It isn’t a good contract unless it is flexible. Outsourcing agreements should include language addressing how costs will be paid based on a wide range in volume. Many companies use volume bands to calculate variable costs. Some companies use a fixed dollar fee for the provider. There are a variety of tactics one could use based on the individual business. The key is to have contract language that allows for a win/win scenario in a flexible market environment.

Finally, outsourcing relationships fall apart because of poor performance. There are times when the winning bidder just can’t perform at the level you need so you have to fire them. It isn’t like firing a bad employee, it closer to getting a divorce and can be just as painful and costly.

Many companies that outsource don’t seem to think about the details and what they are going to do if they have to fire the service provider. Make no mistake, terminating a contact with or without cause can cost millions. You need to think about what happens to the inventory, the capital equipment, the building, ongoing worker comp issues, shut down and closing costs. All of these and many more issues need to be considered and you must spell out who is liable for each issue under each scenario. Once you’ve decided to end the relationship, you could save yourself millions if the contract addresses the shut down process correctly and if the shut down process is management right.

There are many reasons to outsource. The key is to have a good contract that will protect everyone’s interest, achieve the original goals that drove the decision to outsource, and ensure win/win relationships between the parties. If not done properly, however, outsourcing will end up costing your company a lot of money, and it could ruin your career.

Reverse logistics, or returns management, is often an overlooked link in a company’s supply chain. For the majority of supply chain executives, the returns processing department is that dirty, disorganized part of the warehouse that they don’t even like to walk by, much less do anything about. It is difficult to get excited about reverse logistics because returns aren’t pretty and the impact on the company is not clear.   It is hard to overcome “ugly and confusing” without a significant reason to do so.

However, according to a February 2010 study by The Aberdeen Group, companies that were considered best-in-class in returns processing averaged a 93% customer satisfaction rating. This was 12% higher than the lower 80% of companies surveyed.

The lesson is clear. Focusing on returns processing, aka reverse logistics, pays off in better customer satisfaction and that will directly increase earnings.

The National Retail Federation reported the rate of return for 2009 was over 8% of total sales. That same survey reported that 58% of retailers that participate used a manual system to track returns.  For manufacturers, the picture isn’t any better.  Again, the 2010 study by The Aberdeen Group reported that the cost of processing returns for hard goods manufacturers can range from 9.0% to 14.6% of sales.  Just like their retail counterparts, over 60% of the companies had no tracking system and called out the need for visibility as the major gap in their reverse logistics program.  Both retailers and manufacturers rated returns management as “very important”, yet in many companies, reverse logistics is virtually ignored.

Look at the implications of these two studies from the  reverse point of view.  Returns average over 8% of total sales, cost anywhere from 9% to 15% of sales to process, impacts customer satisfaction by as much as 12%, yet virtually ignored by executive management around the world. The question is “Why?”

Why would top leaders, captains of industry, ignore a function that could improve customer satisfaction by 12% or more. Why would companies known for their controls and discipline allow 8% of their inventory go to waste and fall off the grid? Why would corporations known for their ability to focus their team and execute strategy ignore a process that costs 9% to 15% of sales?

The answer is perspective and resources. Perspective can be difficult because few look at returns process or think reverse logistics pipeline. A CEO may see that their return rate is up from 8% to 10% during Christmas, but few have visibility to the total cost of processing those returns.  Every senior executive understands the importance of communications when interacting with customers who are returning a product but few look at the return policies and associated procedures to see if they are causing customer dissatisfaction or creating trouble with their suppliers.  Often when companies do take a look at the reverse pipeline, they are reluctant to commit resources to improve the processes.  Even if they did focus their talent and resources on returns, most companies don’t know where to begin or have the valuable experience to address the issues with improvements that will put money on the bottom line.  For many, the result is that reverse logistics gets ignored and neglected.

If your company hasn’t examined their reverse logistics processes in over the last couple of years, or if you are a senior executive asking yourself basic questions like “I wonder how we handle returns?” you have a big opportunity to increase customer satisfaction, reduce expenses and drive profitability sitting right under your nose.

In this podcast, Curtis Greve covers recent studies that show the impact of reverse logistics on customer satisfaction.  Did you know that companies that are considered in the top 20% in terms of reverse logistics capabilities have, on average, a 12% higher rating in customer satisfaction than the lower 80% of companies?

Also, according to a study conducted by Harvard Business Review, for each 1.3% improvement in customer satisfaction, sale increase by 0.5%.  Extrapolated, this gives companies that are considered best-in-class in reverse logistics programs almost a 5% increase in sales.

Listen to today’s podcast and learn the four key areas that companies need to develop to improve their reverse logistics program and how that will lead to improved customer satisfaction and sales.

The Reverse Logistics Podcast

Your host is Curtis Greve.

The Reverse Logistics Podcast

Your host is Curtis Greve.

Reverse logistics was born from the desire to improve customer satisfaction. As competition increased and the living standard improved after World War II, customers demanded better quality and service.  As a result, people started to return items at a greater rate.  Retailers and manufacturers, seeing an opportunity to gain or keep market share eased their return policies.  For many companies, such as Wal-Mart, this was way to differentiate themselves to the customer.

In the mid 1980′s, when I was responsible for Walmart’s reverse logistics operations, I received a call from Sam Walton’s office.  Mr. Sam wanted a returned item that was an outrageous example of an item that had been returned and money refunded to a customer.  He was going to use it at an upcoming store manager’s meeting.   I went out on the floor and found a Stanley Thermos that we had recently processed from a store. On the bottom of the thermos there was a date stamped showing the date of manufacture – 1954. The first Walmart store didn’t open until 1962.  I grabbed the thermos and the store return tag and sent it over to Mr. Sam’s office.

A few weeks later, at the Wal-Mart Store Manager’s meeting, Mr. Sam held the thermos up and asked the store manager that had given the refund to come up on stage. The nervous manager walked up on stage and stood beside  Mr. Sam.  Mr. Sam shook his hand, thanked him for doing a great job and then praised him for providing such great customer service.  This guy understood that taking back a return wasn’t about a $20 thermos, that had clearly not been bought at Walmart.  It was about customer satisfaction.

All the managers in the attendance got the message.  Over the next few months, the volume of Wal-Mart’s returns increased significantly, as did sales, earnings, and market share, all which were the result of keeping customers happy, one return at a time.  By the way, that same Stanley Thermos is now on display in the Walmart’s Visitors’ Center in Bentonville Arkansas.  The message lives on.

Reverse logistics is all about customer satisfaction.  In a study published by the Aberdeen Group in February 2010, out of the 160 enterprises examined, those companies rated in the top 20% in terms of quality of reverse logistics program had an average customer satisfaction rating of 93% compared to the other firms ranked in the lower 80%, whose average customer satisfaction rating was 81%.

In other words, companies that had well developed reverse logistics programs were ranked significantly  higher in customer satisfaction.  Interestingly, the same study found that for both, the top 20% and the lower 80%, the cost of reverse logistics, as a percent of total service operations costs, were within 1%.  The point being, it isn’t about spending more money to process returns.  The difference is in how and where you spend the money you invest in your reverse logistics program.

Every executive understands the positive impact of improving customer satisfaction.  Sales grow, customer turnover decreases, over all moral improves and earning go up.   This study proves that there is a direct relationship between customer satisfaction and reverse logistics.  Reverse logistics can help both top line and bottom line results through processes  that improve customer satisfaction.