Refund Policy
The terms and process for refunding a customer. A generous policy raises conversions by 18% on average.
In practice
A generous return policy is a marketing tool. Zappos built an empire on 365-day returns. A customer who had a positive return experience buys again 89% of the time.
Common misconception
'Generosity means a loss.' Customers who have a positive return experience spend 60% more annually than those who struggle to return items.
How to fix it
Too many returns? (1) which products get returned? (2) reasons: 'not as expected' signals a content problem, 'defective' signals a packaging problem.
Example
A clothing store: 24% return rate, 70% due to 'didn't fit.' A size guide plus live chat cut it to 14%, saving $9,000/month.
Priority
Post a clear policy on every product page and in the footer. 30 days is recommended.
Related terms
Keep learning. Metrics that touch the same area:
- ChargebackPaymentsA customer disputing a charge through their bank. Costs the merchant: a $7-15 fee plus the lost amount. Above 1% puts the account at risk.
- Reverse LogisticsLogisticsManaging product returns: collection, inspection, sorting, restocking, or recycling. Costs 2-3x regular shipping.
- Trust SignalsUXElements that establish credibility: SSL (lock icon), payment badges, phone number, return policy, physical address, reviews, media mentions.
- Payment GatewayPaymentsA service for accepting payments. Stripe, PayPal, Tranzila, Cardcom. Fee: 1.4-3.5% plus a fixed amount.
- PCI DSSPaymentsSecurity requirements for any business handling credit card data. Non-compliance means fines and account termination.
- BNPL – Buy Now Pay LaterPaymentsKlarna, PayPlus, Afterpay — interest-free installment payments. Raises AOV by 20-30% but carries a 2-6% fee.
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