As a New Hampshire-ite, I need really good winter boots if I’m to leave the house between November and March. The last time I was in the market for such boots, I saved up and splurged on a pair of LL Bean’s infamous Bean Boots. They were pricey, but I was confident that if they weren’t up to snuff after a long winter of snowy, slushy treks to my kids’ bus stop, I could return them and find something else that was.
Which is why I was shocked to learn of LL Bean’s recent change to their infamous return policy. Yes, their new policy is still very generous, but I had to imagine that this change would still result in a hit to their brand. I thought, surely, there must be a lot of others that shop LL Bean because of the assurance of a “forever guarantee.” Would they lose customers as they tightened up on returns? Would they add value in another area of the customer experience to make up for it?
I asked some of our Harte Hanks Marketing Advisory Board experts for their thoughts on LL Bean’s future. Read on for their (varied) reactions to the new return policy.
No worries. LL Bean made the right move.
Ken Bernhardt, Regents Professor of Marketing Emeritus, Georgia State University, is of solid mind that the change in return policy is a “non-issue.” He explained:
“All that is changing is that they will no longer honor the warranty for those who are engaging in clear fraud. They were forced to do this by the dramatic increase in the number of people bringing in very old used purchases that they probably bought at a garage sale or thrift shop. They are very cognizant of their reputation and will still most likely honor all “legitimate” returns, even after the one year period. It is notable that many other retailers have had to change their policies given the rising level of “bad” behavior by consumers. Almost all customers will think that their return policy is more than reasonable and know that the company will stand behind their products.”
Kim Whitler, Assistant Professor, University of Virginia, Darden School of Business, agreed:
“LL Bean is very brand focused and they take their origins—and their return commitment—seriously. What did the return policy really mean? Leon Leonwood Bean started his company on a promise of quality and when those early returns came in, he kept his word. The current shift in policy does not change that same commitment. They simply have said that the product return has to be within a year, which is a reasonable period of time for consumers to know whether there is something wrong with shoes or a shirt. How many apparel companies allow a consumer to return a product after a year, or after six months, or even after three? Ethical behavior is required on both sides—company and consumer—for it to work. If consumers take advantage of an open-ended policy and return products that are simply worn, rather than defective, then this hurts both other consumers (who have to pay more for their products to cover the cost of returns) and the company. This new policy is a way of honoring their commitment to quality and customer service with an extremely generous return policy, while both protecting other consumers and the company.”
"Ethical behavior is required on both sides—company and consumer—for it to work. If consumers take advantage of an open-ended policy and return products that are simply worn, rather than defective, then this hurts both other consumers (who have to pay more for their products to cover the cost of returns) and the company." —Kim Whitler, Ph.D.
While both Kay Lemon, Accenture Professor of Marketing, Carroll School of Management at Boston College, and Frank Grillo, Harte Hanks CMO, agreed that LL Bean’s policy is fair and will have little impact on LL Bean’s overall performance, they both explained this could become a hairy issue—and other brands should take heed.
“I think that the change in policy reflects, potentially, a broader issue in consumer decision-making: the issue of the ‘jay-customer’ or ‘problem-customer’ who takes advantage of such generous policies (*see references below).
One can think of the Best Buy example, in which they portrayed some customers as "angels" and others as "devils,” and how they severely limited their returns policy to reduce the ‘over-returning’ behavior of some customers. Or the well-publicized example of Filene's ‘firing’ a customer who had been a great customer but also had high returns. The tightrope that firms walk is, on the one hand, taking care of their best customers (and growing new customers into best customers), and on the other hand, managing the costs associated with lower-profitability customers who still add value to the company—without upsetting either group.
It's really quite a complex issue—understanding how changes in policies may influence your current customer base and your non-customers in unintended ways. In sum, I think the ‘still generous’ one year return policy is a nice middle ground that enables LL Bean to retain their customer-centric approach and to minimize the long-term risk of ‘over-returners.’”
Frank outlined an advisory for less-established brands:
“I think the change is rationale given the abuse of the intent. But the challenge and learning for a brand is that when you stake out a leading position it can be very hard to make a change even when then change is rationale and will have very little effect on the majority of customers.
They made this policy an integral part of the value proposition to their customers, whether or not I ever took advantage of it. By taking it away they have diminished the perception of their value. Given their overall strength they will survive this bruised a little. Other brands need to learn from this, though—they might not have the attributes to safely navigate through a fundamental change in value proposition.”
"Other brands need to learn from this—they might not have the attributes to safely navigate through a fundamental change in value proposition.” —Frank Grillo, CMO
What were they thinking?
Perhaps my favorite response came from John Deighton, Baker Foundation Professor of Business Administration, Harvard Business School, who had a unique take on the over-return issue Bean was facing:
“If I have the facts correct, a company with annual revenues of $1.6 billion has decided to reverse a policy that was costing $50 million a year in refunds on “destroy-worthy” items. Why? If people knew only one thing about LL Bean, it’s that they had a returns policy that testified to the durability of what they sell. Bean says that people spread the news about the returns policy on social media. Some people call that earned media, but not Bean. They think it is ruining their business.
The original Leon Leonwood Bean understood the power of reputation. If he’d passed any of his wisdom onto his great grandson, Mr. Gorman would be rounding up the cruisers who search for Bean merchandise in Goodwill stores and turning them into brand ambassadors.”
What can brands do about the issue of returns?
Use these “bad customers” as brand ambassadors? Now, that’s a unique approach. But brands are probably looking for more practical (less risky?) ways to reduce their returns. For that, we can turn to Scott Neslin, Albert Wesley Frey Professor of Marketing, Tuck School of Business, Dartmouth College, who actually made a prediction that returns would be a major issue for retailers in 2018.
Regarding LL Bean specifically, he explains that he views the issue at three levels: strategically, competitively and tactically:
Strategically: The LL Bean brand was strongly built on trust. The customer trusted the quality of LL Bean products, and LL Bean trusted customers to make use of the lifetime return policy without guile. Unfortunately, I think that trust started to break down—LL could no longer trust at least a subset of its customers to adhere to the policy without guile. In my view, this is a product of online shopping. It’s more difficult to maintain the deep trusting relationship LL Bean had with its customers in an online environment.
Competitively: LL’s return policy is now in line with REI’s, which I believe also is a one-year horizon. However, LL’s return policy can no longer be a signal LL can use to connote the quality of their product. They have other ways to do this, but the strong signal via the return policy no longer can be used.
"...my concern is LL Bean has woken a sleeping dog—customers will be more aware of the option of returning products when they purchase, and as a result, the move will result in more returns. —Scott Neslin, Ph.D.
Tactically: I’ve been working in the area of product returns and it made me realize how important an issue it is in today’s online environment. That is why I singled it out as one of the issues to look out for in 2018. LL Bean, like its competitors, is facing too many returns, exacerbated by the free shipping “movement.” It’s difficult to predict, however, what effect tightening its policy will have. My research suggests that loosening the policy (via free shipping) increases returns because customers are encouraged to buy more risky products. Therefore, tightening the policy should decrease returns. Customers will be careful and buy safer products, and there will be fewer returns. But my concern is LL Bean has woken a sleeping dog—customers will be more aware of the option of returning products when they purchase, and as a result, the move will result in more returns. So as a tactic for dealing with the returns problem, I’m not perfectly confident it will work out.”
What will work out? Check out this video in which Scott explains ways for retailers to reduce their returns.
Berry, L.L. and Seiders, K., 2008. Serving unfair customers. Business Horizons, 51(1), pp.29-37)
Harris, Lloyd C., and Kate L. Reynolds. "Jaycustomer behavior: an exploration of types and motives in the hospitality industry." Journal of Services Marketing 18, no. 5 (2004): 339-357).