Re: If you don't have 10% returns then you aren't tryin!
 

Hi Mike,

I can see his point, but when it comes to credit card sales (as most sales are today), I don't think this is practical, as a 10-12% return rate would probably jeopardize one's merchant account.

Just my $0.02 worth . . .

Best,

Paul

Paul that's true but have you considered this...
 

> Hi Mike,

> I can see his point, but when it comes to
> credit card sales (as most sales are today),
> I don't think this is practical, as a 10-12%
> return rate would probably jeopardize one's
> merchant account.

> Just my $0.02 worth . . .

> Best,

> Paul

Paul,

You don't have to refund the card. Send a check or money order...we've been doing that in our business for years with very few problems or complaints. No sense screwing up your merchant account!

Take care,

Mike Winicki

Re: If you don't have 10% returns then you aren't tryin!
 

Mike,

I have a friend who is an actress with a lot of training in psychology. For a while to make ends meet, she had a telemarketing job. She lost the job because she was TOO GOOD at it. Her return rate was too high. She was so good at convincing people to buy that a very high percentage of people realized when they got the merchandise that they hadn't really wanted it.

What made this rate too high? One factor not noted in the discussion here is that it takes a lot of customer service time and effort to deal with dissatisfied customers and returns.

Another factor not mentioned by Sugarman and that almost everyone who's responded in this discussion seems to feel is the effect on the reputation of the company and one's own integrity. A good friend of mine sold some reports by someone else that got about a 10% return rate, and she stopped selling those reports very quickly because the comments made it clear that the buyers expected better quality from her. She felt that in the long run, her business would be more profitable if nearly everyone who bought something felt happy with the purchase.

Finally, it's vital to note that for every dissatisfied customer who returns a product for a refund, there are probably two others who felt the same way but did not request a refund. With a 30% dissatisfaction rate, I think most of us would not be happy, even if it was the road to profit.

Marcia Yudkin


High-priced reports with a low return rate

You make a good point on...
 

the cost of handling customer returns, Marcia. This has to be figured into the equation, which I'm sure Joe had a firm handle on.

I do have a problem with this statement though...

> Finally, it's vital to note that for every
> dissatisfied customer who returns a product
> for a refund, there are probably two others
> who felt the same way but did not request a
> refund.

You are making an assumption that may or may not be true. I think much of it would depend upon how aggressive a merchant was in promoting a money back gurantee and how easy it was for a consumer was to return products. Plus there are different "degrees of disatisfaction", which would have to be discussed and analyzed.

Now I can tell you companies that market apparel via catalogs typically experience a 20-40% return rate, which on the surface blows the 10% rate that Joe suggests for the product category he was discussing (consumer electronics) right out of the water. Now how do those people stay in business? Easy, their margins are high enough compared to the cost of handling returns so that they make money.

Take care,

Mike Winicki

My opinion is...
 

If I had a 10% refund rate, I would examine my promotional piece for accuracy because

I was obviously over-promising and under-delivering.

It may be true about different degrees of customer satisfaction and whatnot. Though, now it is You who is making the assumptions.

The answers given are opinions. Each as valid as Sugarman's. At least, the opinions given here can be made clearer if needs be. Sugarman's quote doesn't do that... Sugarman is not here to make what he said more clear. All we have is your interpretation of it... and your interpretation is as valid as everyone else's.

Also, lets consider the FTC aspect. If you are dis-satisfying at least 10% of your customers enough that they ask for a refund, how many also complain to the FTC about you and your product?

All variables considered, with a 10% refund rate, you are going to get complained about.

So you have to ask yourself... is making one person in ten unhappy with you and your business a good thing to be doing? Is making a large number of people unhappy so as to generate FTC complaints a good things for you and your business? And is generating so much bad word-of-mouth good for you and your business?

I would rather have fewer sales and a lower refund rate, than to annoy ever increasing numbers of people just to turn a buck. That is MY opinion. Sugarman can annoy as many as HE wants to. He is him and I am me. We both have opinions on the matter and conduct our businesses accordingly.

As for apparel... come on Mike... don't start picking and choosing industries to help strengthen Sugarman's point. From what I can tell, Sugarman's statement is aimed at a general market. Apparel by mail has many things going against it that other "general" market products do not - color, size, how it looks on, how clean the item is when it arrives, any pulled stitches, and a market known for buying, wearing once and returning.

Lets apply Sugarman's 10% rule to other industries...

Cars... Ford, how do you feel about getting a 10% request for refund rate? Out of business and sued left, right and center most likely.

Tires. Is a 10% refund rate good for you?

Appliances.

Sony, want a 10% refund rate on the PlayStation? Nintendo? Microsoft?

Sugarman may be comfortable wanting to create so many unsatisfyied people it generates a 10% refund rate. That's him.

You may be comfortable with that too. And that's you.

I am not comfortable with it. So are others in this thread. And as we are each in charge of what our respective businesses do and how we want to run them, what we do in our business is as valid as what Sugarman does in his.

Sugarman is obviously more concerned with bigger bucks because he is willing and eager to make more people unsatsified. And others are more concerned with customer satisfaction.

As Jim Straw says, sort of... everyone is right and everyone is wrong.

As with all things... take what you can use and discard the rest.

This is one bit of Sugarman advice I will be discarding based on the available evidence and how I want to conduct business.

Michael Ross

P.S. Mike, you do know it is against credit card regulations to issue refund checks when the purchase was made via credit card, don't you? You could be risking your merchant ability by doing this.


The Great Ideas Letter satisfies

Re: My opinion is...
 

Michael,

It goes back to who says a 1% return rate is the right rate or 10% is the right rate? It all comes down to the numbers. Feelings... impressions... opinions have nothing to do with it. Apparently Joe using the information at his disposal found that a 10% return rate was acceptable given the amount of sales of a given category. I think given his sales his method was successful. That's not to say it would be successful in all categories.

The bottom line is everyone tells us what the 'bench-marks' should be but I doubt most have the numbers to back it up.

Take care,

Mike Winicki

> If I had a 10% refund rate, I would examine
> my promotional piece for accuracy because

> I was obviously over-promising and
> under-delivering.

> It may be true about different degrees of
> customer satisfaction and whatnot. Though,
> now it is You who is making the assumptions.

> The answers given are opinions. Each as
> valid as Sugarman's. At least, the opinions
> given here can be made clearer if needs be.
> Sugarman's quote doesn't do that... Sugarman
> is not here to make what he said more clear.
> All we have is your interpretation of it...
> and your interpretation is as valid as
> everyone else's.

> Also, lets consider the FTC aspect. If you
> are dis-satisfying at least 10% of your
> customers enough that they ask for a refund,
> how many also complain to the FTC about you
> and your product?

> All variables considered, with a 10% refund
> rate, you are going to get complained about.

> So you have to ask yourself... is making one
> person in ten unhappy with you and your
> business a good thing to be doing? Is making
> a large number of people unhappy so as to
> generate FTC complaints a good things for
> you and your business? And is generating so
> much bad word-of-mouth good for you and your
> business?

> I would rather have fewer sales and a lower
> refund rate, than to annoy ever increasing
> numbers of people just to turn a buck. That
> is MY opinion. Sugarman can annoy as many as
> HE wants to. He is him and I am me. We both
> have opinions on the matter and conduct our
> businesses accordingly.

> As for apparel... come on Mike... don't
> start picking and choosing industries to
> help strengthen Sugarman's point. From what
> I can tell, Sugarman's statement is aimed at
> a general market. Apparel by mail has many
> things going against it that other
> "general" market products do not -
> color, size, how it looks on, how clean the
> item is when it arrives, any pulled
> stitches, and a market known for buying,
> wearing once and returning.

> Lets apply Sugarman's 10% rule to other
> industries...

> Cars... Ford, how do you feel about getting
> a 10% request for refund rate? Out of
> business and sued left, right and center
> most likely.

> Tires. Is a 10% refund rate good for you?

> Appliances.

> Sony, want a 10% refund rate on the
> PlayStation? Nintendo? Microsoft?

> Sugarman may be comfortable wanting to
> create so many unsatisfyied people it
> generates a 10% refund rate. That's him.

> You may be comfortable with that too. And
> that's you.

> I am not comfortable with it. So are others
> in this thread. And as we are each in charge
> of what our respective businesses do and how
> we want to run them, what we do in our
> business is as valid as what Sugarman does
> in his.

> Sugarman is obviously more concerned with
> bigger bucks because he is willing and eager
> to make more people unsatsified. And others
> are more concerned with customer
> satisfaction.

> As Jim Straw says, sort of... everyone is
> right and everyone is wrong.

> As with all things... take what you can use
> and discard the rest.

> This is one bit of Sugarman advice I will be
> discarding based on the available evidence
> and how I want to conduct business.

> Michael Ross

> P.S. Mike, you do know it is against credit
> card regulations to issue refund checks when
> the purchase was made via credit card, don't
> you? You could be risking your merchant
> ability by doing this.

But Mike, you asked
 

What I think, in your first post. And now you're saying "opinions have nothing to do with it."

Opinions have Everything to do with it...

To quote your quote... "One of the symptoms of not doing a good marketing job is when most people feel they got a better product and value than they thought they would."

Meaning: you under-promised and over-delivered.

And Joe says THAT it bad marketing.

The implication being... it is better to over-promise and under-deliver because you will make more sales.

Again, I say, it is not something *I* am comfortable with. JS obviously is, otherwise he would not suggest to do it.

And while it is nice to say it all comes down to the numbers, it cannot be totally about the numbers. Running totally by the numbers is what generates feelings of ill will from customers. That's why they feel used and abused... as if the business is just after their money. Because when you run totally by the numbers, all you are interested in is the customer's money.

It really boils down to your own internal standards as far as customer satisfaction goes.

> Apparently Joe using the
> information at his disposal found that a 10%
> return rate was acceptable given the amount
> of sales of a given category. I think given
> his sales his method was successful.

The success of the method is not being questioned here. The ethics of it are. JS is basically saying to under-deliver and over-promise.

> The bottom line is everyone tells us what
> the 'bench-marks' should be but I doubt most
> have the numbers to back it up.

I don't recall this "everyone tells us what the benchmarks should be" thing. Now you're changing the subject. JS quotes some averages... and that's all they are. And averages are made up by higher than average numbers and lower than average numbers.

You asked for my opinion, I gave it. It is different to JS's opinion on the subject and, I gather, your opinion.

I won't run my business JS's recommended way. JS can. You can. The whole world can for all I care. I won't. To hell with the numbers. I'm about trying to please the customer. Not "get as much business as you can and to hell with pleasing the customer."

It's about The Pizza in the Oven.

Michael Ross


Discover The Great Ideas Letter

Michael...you see it one way, I see it another...that's OK.
 

> Opinions have Everything to do with it...

> To quote your quote... "One of the
> symptoms of not doing a good marketing job
> is when most people feel they got a better
> product and value than they thought they
> would."

> Meaning: you under-promised and
> over-delivered.

> And Joe says THAT it bad marketing.

> The implication being... it is better to
> over-promise and under-deliver because you
> will make more sales.

That does not have to be the implication...the fact Joe is pointing out is that if you under-promise and over-deliver a great many people will not realize how great your product is. Thus they won't derive the great things your product delivers. They don't buy because your marketing is weak. You haven't flagged as big an audience as you could have with better marketing. In essense you've robbed the customer of the joy/benefit/excitement of owning your product because they don't realize (or realize enough) that your product is right for them.

What the Joe's message is: "Promise just as much as you deliver!"

Michael, after spending the last 20+ years marketing a wide variety of products and businesses I can tell that most businesses suffer from under-promising and over-delivering rather than the other way around and that's why they aren't as profitable as they should be. The companies that do it the other way (the illegal, non-ethical way) aren't in business very long. I think Joe's longevity speaks volumes.

Take care,

Mike Winicki

Hang on...
 

> the fact Joe is pointing out
> is that if you under-promise and
> over-deliver a great many people will not
> realize how great your product is. Thus they
> won't derive the great things your product
> delivers. They don't buy because your
> marketing is weak. You haven't flagged as
> big an audience as you could have with
> better marketing. In essense you've robbed
> the customer of the joy/benefit/excitement
> of owning your product because they don't
> realize (or realize enough) that your
> product is right for them.

> What the Joe's message is: "Promise
> just as much as you deliver!"

Is this further explained in JS's Work? Because it was not part of the post you asked opinions on.

I alluded to this in my previous post... that JS wasn't here to "clear up" his statement.

Regardless of that, lets run some numbers...

Product: BlueBlockers (just for example)
Retail Price: $150
Cost Price $25
Profit: $125
Total sales: 100,000 units
Total Revenue: 12,500,000
Refunds at 10%: 10,000 units at $125 = 1,250,000

That's JS's "as quoted by you" method.

Refund reducing ploy...
Cost: $1.
Total cost for 100,000 sales = $100,000
Refund rate reduce to 9%.
Refunds thus: 9,000 units at $125 = $1,125,000

Difference: $125,000 less refunded.

Take away $100,000 spent on premium = $25,000

By giving a premium (over delivering) you are $25,000 better off.

IF, each additional premium reduced the refund rate by 1% and cost $1, and refunds could not be reduced below 3%, then this example would have you spend the following:

Premiums $7
Refund rate 3% (3,000 units)
Total refunded $375,000
Total spent on refund reducing: $700,000
Total out: $1,075,000
Better off by: $175,000

Of course, these numbers are made up and IF numbers.

It assumes the product would always get a 10% refund rate no matter what type of marketing, without a premium. It assumes each premium costs $1 and reduces the refund rate by 1%, and that there is a $125 profit per sale. With no "restocking" expense. And so on.

The point is, by reducing your refund rate, you stay in front... get to keep more money.

But you gotta do the math first - as it applies to your business.

For JS to make a blanket statement is shoddy.

> Michael, after spending the last 20+ years
> marketing a wide variety of products and
> businesses I can tell that most businesses
> suffer from under-promising and
> over-delivering rather than the other way
> around and that's why they aren't as
> profitable as they should be. The companies
> that do it the other way (the illegal,
> non-ethical way) aren't in business very
> long. I think Joe's longevity speaks
> volumes.

My Biggest question is about Customer Satisfaction. JS may have sold many many items over many many years. How Many of those items were to previous customers though?

Also, the bit you quoted from JS was comparing an electronic product with an info product, right?

Maybe the pocket calculator vs a niche-market audio tape set?

Can such items even be compared in the first place?

How many items has JS sold to the same market? As in, sold along a theme as an info-product creator might do.

In other words... was JS after repeat sales or one off sales on the front end.

There are a lot of questions to be answered. And knowing the answers might give an insight into why JS would suggest a 10% refund rate.

Again, without JS here to "clear things up" (or me having a copy of his Work in front of me to get clarification myself) we can only comment on the small bits presented and asked for comment.

Michael Ross


Get business ideas. Click here.

More of Joe's Chapter on Returns...
 

> Is this further explained in JS's Work?
> Because it was not part of the post you
> asked opinions on.

> I alluded to this in my previous post...
> that JS wasn't here to "clear up"
> his statement.

> Regardless of that, lets run some numbers...

> Product: BlueBlockers (just for example)
> Retail Price: $150
> Cost Price $25
> Profit: $125
> Total sales: 100,000 units
> Total Revenue: 12,500,000
> Refunds at 10%: 10,000 units at $125 =
> 1,250,000

> That's JS's "as quoted by you"
> method.

> Refund reducing ploy...
> Cost: $1.
> Total cost for 100,000 sales = $100,000
> Refund rate reduce to 9%.
> Refunds thus: 9,000 units at $125 =
> $1,125,000

> Difference: $125,000 less refunded.

> Take away $100,000 spent on premium =
> $25,000

> By giving a premium (over delivering) you
> are $25,000 better off.

> IF, each additional premium reduced the
> refund rate by 1% and cost $1, and refunds
> could not be reduced below 3%, then this
> example would have you spend the following:

> Premiums $7
> Refund rate 3% (3,000 units)
> Total refunded $375,000
> Total spent on refund reducing: $700,000
> Total out: $1,075,000
> Better off by: $175,000

> Of course, these numbers are made up and IF
> numbers.

> It assumes the product would always get a
> 10% refund rate no matter what type of
> marketing, without a premium. It assumes
> each premium costs $1 and reduces the refund
> rate by 1%, and that there is a $125 profit
> per sale. With no "restocking"
> expense. And so on.

> The point is, by reducing your refund rate,
> you stay in front... get to keep more money.

> But you gotta do the math first - as it
> applies to your business.

> For JS to make a blanket statement is
> shoddy.

> My Biggest question is about Customer
> Satisfaction. JS may have sold many many
> items over many many years. How Many of
> those items were to previous customers
> though?

> Also, the bit you quoted from JS was
> comparing an electronic product with an info
> product, right?

> Maybe the pocket calculator vs a
> niche-market audio tape set?

> Can such items even be compared in the first
> place?

> How many items has JS sold to the same
> market? As in, sold along a theme as an
> info-product creator might do.

> In other words... was JS after repeat sales
> or one off sales on the front end.

> There are a lot of questions to be answered.
> And knowing the answers might give an
> insight into why JS would suggest a 10%
> refund rate.

> Again, without JS here to "clear things
> up" (or me having a copy of his Work in
> front of me to get clarification myself) we
> can only comment on the small bits presented
> and asked for comment.

> Michael Ross

Michael,

Here is more of Joe's chapter on "The Rate of Return":

"Let's talk about return rate in general for a moment to understand my comments more completely (see my first post in this thread for these comments).

The one thing I learned very early in my advertising career was that you can't please all of the people all of the time. Remember my first pocket calculator ad for the Craig 4501 that I told you about in an earlier marketing story?

I was personally very exited about this new pocket calculator back in 1971--one fo the first in the world. It was selling for $240 and it could actually fit in your pocket. At the time it was a truly revolutionary product.

When we received our first response to a mailing I made, we got a 10% return rate. Some of the people who returned it thought it was the biggest rip-off they ahd ever seen. One letter said, "You guys should be put in jail for trying to foist something like this on the consumer."

But we also received some very complimentary letters. One said, "I must congratulate you on this wonderful and exciting product and your excellent service."

Had I examined just the return letters without looking at the complimentary letters, I would have been worried. But I still wondered, how could a small percentage think a product is terrible while another group thinks the product is terrific? I soon realized that you cannot please all the people all the time and that a return rate of 10% was a normal day-to-day average, for a variety of reasons.

But whenever my return rate dropped well below 10%, I always reread my copy to see if perhaps I was not selling hard enough. And if the return rate was very high, I took close look at my copy to see if the product lived up to my promises.

Loot at it another way. I satisfied 90% of my customers. Not bad. When does a political candidate satisfy that large a percentage?

Return reates reflect more than they way you've written your copy of course. Ther performance of your product is also important, and there are other subtle factors that also affect return rates. One of the most important is speed of dleivery. If you ship a product right away, your customers who receive it are still in a state of anticipation. They still desire the product and this desire is fresh in their mind.

But ship a product late, and other the customer may even forget he or she ordered it. Customers may change their minds, financial circumstances may take a turn for the worse, or buyer's remorse may surface--and all these factors grow in direct proportion to the time it takes you to ship your product.

Another factor is the presentation itself, the impression the customer gets when he or she receives a package. Is the box substantial enough so it arrives in good shape? Is the merchandise wrapped properly? In short, what is the impression your customer gets upon receiving the product?

Finally, you should look at a customer return not as a problem but more of an opportunity--an opportunity to show what a terrific company you really are. Unfortunately, the simple act of fulfilling orders does not make cusotmers enthusiastic. But how you resolve their problems does. And supplying the customer with simple instructions and a simple procedure for returning their purchase will ensure you of an enthusiastic customer when it comes time to order again.

If you understand the meaning of the return rate associated with the products you ship in response to your advertising and know what an average return rate (neither too high or too low) means that you can get the greatest response and still satisfy the largest segment of your customers, you'll hold the secret to maximizing your profits.

And if you realize that a returned package from a dissatisfied customer is not a problem but an opportunity, then you've got one of the real secrets of growing a mail order business"

Yes, Joe was applying his 10% return rate to consumer electronics plus he was building a list...customers were sent a catalog of other products.

Would he apply his 10% return rate on one shot sales like 'Blublockers'? That's a good question, maybe I'll ask him. I would think, he being a good marketer would test market the product under a variety of conditions and let the numbers decide what is the right approach.

And you're right you have to analyze the numbers.

Take care,

Mike Winicki