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Making Loyal Customers


Copyright 1992 Nolo Press

Customers are the lifeblood of any small business or professional practice. To thrive, you not only need a steady stream of people who keep coming back for more goods or services; you also need them to enthusiastically recommend your business to their friends.

To build a loyal following, you must do more than just give people what the law requires. Knowledge of your legal rights and those of your customers is important, but don't let legal technicalities take priority over a key objective of your business: to keep happy customers acting as unpaid ambassadors for your business.

Whether you run a restaurant, a hardware store or a sand and gravel business, if a customer complains about your product or service, don't quibble. It's much smarter to point to a well thought out customer satisfaction policy as you eliminate or reduce the charges--and maybe even give the customer something extra as a reward both for putting up with the problem and for telling you about it.

Maybe you won't make any money on that transaction; you'll probably even take a small loss. And yes, once in a blue moon someone will take unfair advantage of your policy. So what? When you consider the good feelings that customers will have about your business--and the fact that you'll receive positive rather than negative word-of-mouth from everyone you treat generously--it's a bargain.

Even if you aren't convinced that happy customers make a happy business, think of it this way: A customer whose problem you resolve is unlikely to complain to any agency or board with power to license or oversee your business. Anyone who has had to cope with an investigation knows that even if the original complaint has no merit, the process can be worrisome and, if lawyers are involved, expensive.

Side Bar--Going the Extra Mile

When Sandra brought her white wool blazer home from the dry cleaner's, she was dismayed to see that it had a very slight pink tint. Sandra reported the problem to Milt, the owner of the cleaning shop. Milt could have legally responded in a number of ways, including the following:

But Milt was a wise business person. He didn't stand on his legal rights. Instead he told Sandra: "I'm sorry this happened. We use state-of-the-art cleaning processes, but apparently something went wrong. In any case, we guarantee your complete satisfaction. Since we can't fix this type of damage, let me know the purchase price of an equivalent new blazer." Sandra did, and Milt reimbursed her the full amount.

As a result of his enlightened attitude, Milt had a happy customer. In the two years since the blazer problem, Sandra and her husband have taken more than $500 worth of cleaning business to Milt's shop. They not only continue to be loyal customers, but--even more important--every time Sandra wears her new blazer, she tells the story of how Milt bought it for her and she recommends his business. Because Milt treated Sandra well, the blazer now ranks as one of Milt's all-time best investments.

Now consider what would have happened if Milt had responded with a strictly legalistic approach, offering Sandra the value of a two-year old blazer. Sandra might have grumbled and accepted the $20 payment, or she might have taken Milt to small claims court and perhaps have won a few dollars more. But this much is certain: Sandra and her husband would never have taken any more cleaning to Milt's place. Even worse, they'd likely have told others about Milt's inadequate service for years to come and might have complained to local better business and state regulatory agencies. So while Milt was thinking of himself as a tough business person who knows his legal rights and never lets customers rip him off, he actually would have foolishly lost many thousands of dollars of business.

Refunds

Strictly speaking, once a sale (other than a door-to-door sale) is complete, you don't have to give a refund to a customer who changes his or her mind, unless the goods or services you sold were seriously flawed or some provision allows one of the parties to cancel.

So much for the legalities. In real life, most retailers let customers return merchandise for either a cash refund or at least a store credit. Sometimes retailers impose conditions. For example, the customer must return the merchandise within a certain number of days; the merchandise must be unused; the customer must show a receipt or other proof of purchase.

A liberal refund policy can give your customers confidence in your business and can be an effective marketing technique. Whatever you decide to do about a customer recourse policy, word your rules as positively as possible and post them conspicuously in your store. Posting your policies may soon be a legal requirement, anyway; California now requires merchants to post their return policies if they don't give either a cash refund or credit refund and don't allow an equal exchange for merchandise.


refunds
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