Tuesday, January 20, 2009

Customers are talking: using reverse logistics to improve products

As part of our regular Tuesday series on finding and acting on customer use stories, let's talk about reverse logistics. This is the process by which retailers and manufacturers deal with customer returns.

This article (hat tip Colin Shaw) discusses how companies can examine and make changes to their reverse logistics procedures to reduce costs and streamline the process. This is good advice as far as it goes.

But like many "customers are talking" topics, companies need to take an additional step in order to really utilize the reverse logistics process to its utmost.

Each customer return is a story. Capturing and collecting those stories, and regularly examining them for patterns, can yield important information about how the product is designed, communicated and supported. For example, consumer electronics are notorious for their returns frequency, and the reason for these returns often is that the product is difficult to use or its documentation is poorly written or inadequate (multi-language manuals introduce another set of obstacles for customers).

A company can work with its retailers, as part of the overall design of the reverse logistics process, to capture important information about why the product was returned. Ideally, the verbatim customer story is captured--which is easy to do with online returns.

The collection, of course, is the simple part of the equation. The more complex task is the sensemaking of the numerous narratives captured. This sensemaking, more of a collaborative thinking process than an analytical one, can be accomplished with training and skilled mentoring.

The potential payoff is large: marketing managers who are made of aware of why returns happen can make (often simple) changes to packaging, design, channel strategy or documentation to improve initial customer satisfaction. Not only does this reduce returns, it also increases the likelihood that more people buy the product in the first place.

A friend owns a company that manages reverse logistics for name-brand consumer electronics manufacturers. I asked him if he knew why a certain product was often returned and he said, "Yes, always." I asked him if he had a way of letting the marketing folks at his client know these reasons. And he shook his head.

Given that many companies are outsourcing their reverse logistics operations to third parties, they need to take care that they keep the channel of communication open to learn why items are returned, and what can be changed about the product, its support documentation or its point of sale in order to make more initial purchases successful ones.

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