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A Surprising Way To Minimize Product Returns

Relevant topics Archive, Strategy, Advertising

  • Neuromarketing Principle:
    The Endowment effect causes consumers to overvalue products. This is because loss aversion and perceived ownership are at play.
  • Application:
    Add a free gift with a purchase to attract and keep customers by reducing their intent to return bought products.
  • We live in a returns culture, where delivery is free and so are the returns. Zero shipping fees and favorable in-store return policies make it very attractive to bulk buy products consumers don’t need. When consumers return their purchases, it causes losses for the companies due to extra logistical and repackaging costs. An increasing amount of returns have a negative impact on the environment too.

    Marketers should strive to reduce the returns to save costs and reduce the adverse footprint on the environment. A recently published study has discovered a simple yet highly effective technique companies can use in this regard.

    This one thing will minimize product return tremendously!

    There is evidence that a small gift with a purchase can reduce consumers’ return intention. Non-monetary promotions are perceived differently than price discounts and are more competitive. This is because consumers become attached towards the goods they own. Psychological reasons for product returns are induced by the endowment effect. Endowment effect causes consumers to overvalue the goods. This overvaluation is caused by the loss aversion and perceived ownership.
    Loss aversion means that losing something is hurtful. When a consumer has to give up something that they already own, this is framed as a loss to them. Losing something alone can result in feelings of aversion or pain, but the pain is even greater when a consumer is already attached to an item.
    Perceived ownership is the sense of possession over a product, or simply a perception of “being mine” towards an object. Perceived ownership is further strengthened by the ability to choose from a number of gifts. The act of choosing makes consumers invest time, and as a result their affection towards the gift increases.
    If the product that the customers are purchasing requires high involvement, the choice of free gifts leads to a greater perceived ownership and lower product return intention.

    From a free lipstick to a free electrical step

    Receiving a gift alongside a purchase can reduce consumers’ intention to return a product. It is not only effective in attracting new customers but also in keeping them. Loyalty platforms, where users can select a gift that they would like, can ensure the relevancy and perceived ownership.
    The possibilities to encourage customers to keep their purchases are numerous. From furniture stores that sell couches that come with free electrical steps – to smartphone brands that ship their mobile phones with free headphones and virtual reality sets attached.
    Even on a low involvement purchase, the possibilities for free gifts are endless. This is very popular among cosmetics brands. Another common practice is to redirect a user to a deal website after an online purchase, where they choose a voucher of their liking.

    Choose the gift wisely

    Marketers must consider a variety of areas to ensure free gifts have the intended effect. Availability of stock of the free gifts, fulfilment, defining the right number of gifts to choose from are all factors that must be accounted for. Even the type of the gift is important too. The more common the offer is, the less effective this technique becomes. How common is common? There is a risk of consumers getting overwhelmed and frustrated, if any of the above are not up to the expectations. However, getting it right pays off – a free gift with purchase is a powerful marketing technique.

    Take away points:

    •  Marketers can prevent consumers from returning acquired goods by including a free gift with purchase.
    • Consumers are less likely to return purchased goods if this means they will lose their free gift. This is because loss aversion is at play. Loss aversion means consumers start feeling positive affection towards their gift and it would hurt them to lose it.
    • This can be further strengthened by allowing consumers to choose their free gift. The act of choosing strengthens perceived ownership of that gift.
    • If the focal product is a high involvement product, consumers are even more likely to keep the product as they want to retain their free gift.
  • A Surprising Way To Minimize Product Returns
  • Reference:

    Lee, S., & Yi, Y. (2017). “Seize the Deal, or Return It Losing Your Free Gift”: The Effect of a Gift‐With‐Purchase Promotion on Product Return Intention. Psychology & Marketing, 34(3), 249-263.


    Further Reading

    • The Three Essential Ingredients To Winning The Brains Of Mobile Shoppers

      The Three Essential Ingredients To Winning The Brains Of Mobile Shoppers

      As shoppers, we have learned to be wary of what we purchase and how. We research information and find the ‘best’ products for ourselves and with a heavy dependency on technology, we can now do this wherever we have access to WiFi or data. Six out of 10 mobile users begin their shopping journey on one device, but continue or finish on a different one. Mobile devices provide us convenient access to any form of content, which leads us to incorporate mobile-shopping into our habitual routines.

      Habitual routines can actually benefit retailers, especially for those in a competitive environment. Two positive things happen: one, the habitual interactions provide consumers convenience, reinforcing their experiential state of being in a relationship with a brand, which leads to loyalty. Two, the dependency on their habitual routines will mean that consumers are relying on their automatic thinking and will therefore, spend less time considering alterative brands.

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