Study finds widespread benefit to lenient return policies
New research from The University of Texas at Dallas has found that lenient return policies have a positive effect on consumers’ purchasing decisions in surprising ways.
Researchers analyzed 21 research papers that examined purchases, returns or both. They paid particular attention to how returns and purchases were affected by variations in five return policy elements: time, money, effort, scope and exchange.
The study challenged the underlying assumption that all return policies affect purchases and returns in a similar manner.
Overall, lenient return policies led to increased purchases, the study found. The researchers also found a positive effect — smaller, but still significant — from leniency on the number of returns. Leniency in scope (i.e., generosity in what items are considered “return-worthy”) also increased returns.
“In the pre-purchase stage, consumers might think about the costs and benefits of making a purchase,” said doctoral candidate Ryan Freling in a press release. “If the return policy is lenient in scope — if a sale item can be returned — a consumer might say, ‘Oh this is on sale. It seems like a good value. I’ll buy it, and if it’s not the right color or fit, I’ll return it.'”
But the study also showed return policy leniency should depend on 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 have ironically proven to lessen the likelihood of a return. An offered explanation is the “endowment effect,” which suggests that the longer consumers possess a product, the more attached to it they become.
“The cost of dealing with returns affects the bottom line,” Prof. Freling said. “You want to look at the different dimensions of a return policy, because you may be able to manipulate the policy to achieve your goals.”
- Researchers Examine Effect of Return Policies on Consumer Behavior – The University of Texas at Dallas
Are you convinced that lenient return policies drive greater purchases without being offset by increased returns? What lessons should retailers take from the study around manipulating return policies to support objectives?