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Direct Response Marketing

Support Services: Controlling Communication to Reduce Chargebacks Exposure

17 Aug, 2010 By: Kevin Brown Response

Direct response marketers and continuity shippers face unique challenges in effectively managing product returns. Whereas traditional retailers expect to receive a percentage of returns by product categories, direct response marketers are faced with the task of effectively managing the number of shipments that are refused by consumers who change their minds between order placement and final delivery.

The result can devastate operations and customer service as chargebacks become unmanageable, transportation costs soar and inventory management suffers. How can you minimize the risks associated with this critical component of the supply chain?

Part of the solution may be found in the manner in which you manage your small parcel transportation and data management strategies.

Reducing Exposure to Chargebacks and Diminishing Customer Service

Chargebacks can be particularly troublesome, as they can affect a merchant’s ability to conduct business with credit issuers. The problem typically starts when a customer refuses a shipment without understanding the increasing complexity of distribution models, and expects to be issued a credit in an unrealistic amount of time — which in turn can create customer service issues, since customers may demand credit before the return has even been received at the distribution center.

If you can identify incoming returns before the products arrive on your dock, it can significantly decrease your exposure to chargebacks. But how can you accomplish this?

One of the key factors is your ability to integrate a carrier’s data about refused shipments into your reporting system. If your carrier has the ability to notify you that a particular consumer has refused a package, you can use that information to proactively contact the consumer, determine the reason for the rejection and then take the appropriate action, whether it is to re-ship the product upon receipt of the original materials or immediately issue credit to the consumer.

By controlling the communication early in the process, you can reduce the number of chargebacks while lowering the number of unnecessary customer service calls and improving consumer satisfaction. These are cost savings and service improvements you can take straight to the bank.

Controlling Transportation Costs and Inventory

Because transportation can account for as much as 40 percent of an operations budget, opportunities to reduce those costs can help improve the health of your bottom line. This is especially the case for direct marketers promoting continuity programs, as they depend on a consumer’s willingness to receive multiple product shipments as a part of a program.

But problems can arise when consumers simply stop participating. All too often, instead of calling customer service to notify them of their intent to opt out of the program, they simply refuse the shipment — setting off a chain reaction that can hurt a merchant’s operations on multiple fronts. Beyond the costs and customer satisfaction issues associated with chargebacks, negative impacts can also be seen in shipping costs and inventory management.

Without the ability to identify refused packages prior to their arrival at your dock, you may unwittingly continue sending follow-up shipments from the warehouse — meaning that you now have the cost of the original shipment, the cost of the follow-up shipment and its likely return, and a customer service headache for you and the consumer. It is a tremendous burden for all parties involved, not to mention an unnecessary and expensive proposition. This doesn’t even take into account the inventory problems created when new, yet unwanted merchandise in the supply chain could be better used to fulfill the needs of a consumer who wishes to actively participate in the program.

In summary, the way in which you manage your small parcel shipping and returns can have a measurable impact on your bottom line. However, you don’t have to fall victim to the excessive costs and customer service problems created by chargebacks. With the right technology systems to provide visibility into returns and help you proactively identify and resolve problems, you can significantly reduce the problems associated with chargebacks and reduce pain throughout your organization, from the executive offices to the shipping dock. n

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