Be tolerant toward your buyers and you'll sell more
In 2014, product returns totaled about $280 million across all U.S. retailers.
UT Dallas doctoral candidate Ryan Freling, who is studying marketing in the Naveen Jindal School of Management, conducted the meta-analysis with UT Arlington associate professor of marketing Dr. Narayan Janakiraman and doctoral candidate Holly Syrdal.
The meta-analysis is the first attempt to understand the return policy literature quantitatively and prove that lenient policies positively affect purchase and return decisions, Freling said.
The researchers collected and sifted through dozens of research papers that examined purchases, returns or both. They eventually focused on 21 papers from fields including economics, marketing, decision science, consumer psychology and operations research.
The study challenges the underlying assumption that all return policies affect purchases and returns in a similar manner. It suggests that this is not the case, as retailers tend to impose restrictions to dissuade returns or offer leniency to encourage purchases by manipulating five return policy elements: time, money, effort, scope and exchange.
Overall, lenient return policies led to increased purchases, the study found. The researchers also found a positive effect — smaller, but still significant — of policy leniency on returns.
Freling said the study shows that return policy leniency should depend on the retailer's objectives. If a retailer wants to stimulate purchases, offering more lenient monetary policies and low-effort policies may be effective.
If a retailer wishes to curb returns, longer deadlines to make a return would be more effective. The study found that leniency in time reduced return rates.
Freling said a possible explanation is the endowment effect, which suggests that the longer consumers possess a product, the more attached to it they become and less likely they are to return it.
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