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Business

by Fairfield County Business Journal
by FCBJ

Andi Gray: Drawing the line on free service

Doing a lot of free service repairs for customers who break things. Some of it is in
warranty and some not, but we do it for free anyway to protect our reputation for providing a superior product. Our total service costs are going up each year and it feels like it’s getting out of hand. I recognize there’s a time to do free service and there’s a time to not do that. Where and how do I draw the line?

THOUGHTS OF THE DAY: Free service is a slippery slope. Give customers an alternative. Make sure your service terms are spelled out up front. Standardize terms and enforce them with staff and customers. Consider a restocking fee as protection from the handling costs.

Offering generous returns and service is often good for business. But some customers may start to lean on those policies too much, some not even realizing they’re pushing the boundaries.

Keep in mind that a return policy, first and foremost, is designed to reassure customers that your company is in it for a long-lasting relationship, not just the transaction at hand. Your company wants a top-shelf quality rating. You’re willing to provide customers with a remedy if something goes wrong. Make sure your company extends this policy to customers who deserve that paradigm.

Tell customers who ask for something that there will be a charge for fulfilling the request. Don’t get into defending the reason for changing past practices. Give the customer alternatives if you know of a cheaper way to get the work done. Tell your customer where to go to find out more about that option.

You can also tell your customers they can do the work themselves. Whether they do try on their own or just think about what it would take to do it, they’ll probably end up realizing why there’s value in asking your company to do the work.

Check what’s in the written policies given to customers at the start of a project. Is it clear what is covered and what is chargeable? Back up to the quote or estimate you provide as part of your proposal to take on additional work. Any mention of warranty policy and limits in that document?

Make the time to write a standard warranty, service and returns policy. If you’re not sure what’s appropriate gather input from employees and customers. Look at what your competitors offer and compare policies vs. overall performance to get insight.

Most warranties, service contracts and return policies are in place to reassure customers. Make it clear that the product or service works as stated, and that what is sold is robust enough to survive any stress related to shipping and installation. That’s the usual limit. Any service request or return beyond that limitation is an excess benefit to the customer, will likely cause deterioration in profits if exercised by the buyer and should be avoided.

However, if it is noted that customers have been trained (whether by your company or your competitors) to expect an overly generous policy, increase pricing to account for that convention. Or offer customers a reduced price for a more limited service guarantee. And promote the lower fee as a price advantage as well as a testament to the trust your customers place in your company, because they have no need to ask for a more extensive post-sale guarantee.

If you do allow returns, implement a restocking-fee policy for any return related to anything other than damage. When the goods are returned and it’s agreed they’re in good condition, issue a refund less the cost to handle the shipping and handling related to returning the goods to the shelf. In other words, if the customer isn’t going to do business with your company, make sure your company covers its costs related to taking and then losing the business.

BOOK RECOMMENDATION: “The Customer Rules: The 39 Essential Rules for Delivering Sensational Service” by Lee Cockerell.

Andi Gray is president of Strategy Leaders Inc., StrategyLeaders.com, a business-consulting firm that teaches companies how to double revenue and triple profits in repetitive growth cycles. Have a question for AskAndi? Wondering how Strategy Leaders can help your business thrive? Call or email for a free consultation and diagnostics at 877-238-3535 or AskAndi@StrategyLeaders.com. Check out our library of business advice articles at AskAndi.com.