So, have you attracted users to your site, blown them off through exciting product pages and made them easier through the checkout process? Order confirmation pops up and you send their order within one hour. After a few hours, the funds will reach your merchant account.
Everyone is happy.
OK, everyone is happy until your bank withdraws money from your account and says chargeback and sends it back to your customer.
Yes, chargebacks are a nightmare for e-commerce businesses, costing them millions of dollars every year.
What is a chargeback?
Before we jump into our three tried and tested chargeback defenses, here’s a quick primer on what chargebacks are.
A chargeback is a disputed transaction between a customer and a business.
If the bank decides that the chargeback is genuine, it reverses the transaction and returns the funds to the customer’s account.
If the bank decides that the chargeback is not genuine, the trader must keep the funds.
How do I limit chargeback?
Unfortunately, not all chargebacks are used to counteract actual card fraud.
Sometimes the customer forgets that they bought something and assumes that it is fraud, sometimes they just don’t want to pay and so on.
Protecting your business from chargeback doesn’t have to be a huge ordeal. Doing simple things well can be a real boon for your business and can significantly reduce one of the more annoying parts of an online business.
In this article, I am going to look at three tried and tested strategies that you can apply to reduce the number of chargebacks you receive.
Create a non-abrasive return and refund system
The return process of a brick-and-mortar store is relatively straightforward. If someone wants to return something, they come back to the store and find your customer service desk.
Unfortunately, this can be bypassed-but not unless you’re a techie who knows what he’s doing.
I think so. Your business may be based in New York and your customer may be in Hawaii. This creates huge logistical challenges.
Who arranges the return? Who pays for shipping? When should your customer’s refund be released? Should you return the original shipping? What happens if your delivery company loses the package?
Even a very good return process is still painful for both the merchant and the seller.
Okay, that’s fine and good but how does that relate to chargeback?
Like the convenience of modern customers. Amazon Prime, Drive-Through Fast Food, On-Demand Streaming. Nowadays, people expect things to get easier.
If your return process is not easy, they will look for other alternatives. Unfortunately, more frustrated customers are turning to low-effort as an alternative to chargeback.
I strongly recommend that you start thinking of your return process and chargebacks as direct competition. Now, ask yourself if your return process is interesting enough to take your customers away from the chargeback route.
Okay, terrible enough. Here are some tips to help you create a great return process.
Basically, it’s all about reducing friction. Consider pre-paid, pre-addressed return envelopes included with the order, hiring dedicated return staff, publishing a very short return policy helpful and consistent communication.
Whatever you decide to do, always try and present yourself in your customer’s shoes and their feelings. For example, if you pay them back, how will they feel?
Once your customers know that you offer stress-free refunds, they are significantly less likely to charge back.
Use a name that people can recognize
There is an organization called 37 Signals in the United States. Although they’ve got a few products, they’re best known for a project management tool called BaseCamp.
Basecamp has become so popular that customers have started referring to the whole company as basecamp.
This makes things very confusing when it comes to billing. A customer will receive their statement and view this charge from 37signals LLC and immediately assume that someone has stolen their credit card.
In 2009, 37 signals were shooting chargebacks and they needed a solution So they started experimenting with the narrator of their statement.
After some trial and error, they changed their name to a URL – 37signals-charge.com – so that customers saw 37signals-charge.com instead of 37signals-charge.com in their statements.
If a confused customer types in that URL, they are taken to a website that explains that there are 37 signal companies behind the basecamp and that is why they are being billed.
Chargeback dropped by 30% and (I guess) there were lots of high-fives!
The takeway tip is pretty clean. Choose a statement name that your customers will recognize immediately!
Keep in touch
Think about the last time you got bad customer service. I’m talking really really bad customer service. Warlord, stand-office, neglected customer service.
The type of service where annoyed, low-paid and disgusting support staff pull out the same tinnitus responses before transferring you to a different but equally incompetent department.
Can you feel your frustration boiling over? Can you feel your eyes rolling? Can you feel the urge to slam the phone down?
If customers are given poor service and can’t achieve what they’re trying to achieve, can you really blame them for resorting to alternative processes like chargeback?
The strange thing is, good customer service is not even difficult.
Yes, it’s hard work but you don’t have to completely refine your business or bring in thousands of highly skilled workers.
The biggest change you can make is improving your communication.
Do it regularly, do it fast and make it consistent. Respond to email, phone calls and social media posts as soon as you can
Provide as accurate an answer as possible. Don’t wait to contact your customers. Actively reach out and solve their problems.
You would be surprised at how loyal a customer would be if they thought you were working for them, not against them.
Average chargeback rate
So here you have it, three simple strategies you can use to reduce the number of chargebacks you receive.
Below are some industry standards from merchant services company Ingenico Find your art and see how you compare the average.
|Art||Average chargeback rate|
|Media and e-content||0.31|
How does your business work against industry standards? Let us know in the comments.