A recent September 2016 article in Harvard Business Review discussed the importance of analyzing and making decisions about the five aspects of a returns policy. The five aspects were:
- Monetary Leniency
- Time Leniency
- Effort Leniency
- Exchange Leniency
- Scope Leniency
The article does a great job of explaining each, and I won’t go into it here. What I will discuss, however, is the importance of bringing this up in a planning meeting to describe where your returns policy stands right now. Then, ask yourself objectively which of these areas has been problematic for you or your customers. Next, I want to see you brainstorm alternative return policies. Moving on, consider the pros and cons of each of these alternatives. Finally, devise a new returns policy based on your results.
I don’t have to tell you that business success comes at the margin, nowadays, and even something as subtle as a returns policy should be reviewed. How often? Ideally, annually. If you are small and resources are scarce, every two years sounds acceptable to me.
Michael Emerald, CFA
Consultant, Wall Street Securities Analyst