Skip to content
Product cover

Can Product Returns Make You Money?

April 1, 2010 | J. Andrew Petersen, V. Kumar | Marketing

Many companies see customers’ product returns as a major inconvenience and an eroder of profits. But
recent studies have begun illuminating the potential benefits of allowing customers to return products
with impunity. This research finds that when a company has a lenient product-return policy, which
allows customers to return almost any product at any time, customers are more willing to make other
purchases, thereby raising the company’s revenues from sales. The authors’ own research extended these studies by exploring the trade-offs between the costs of product returns–particularly when customers deem such experiences satisfactory–and their long-term benefits to the company. Analyzing six years of purchase, product-return and marketing-communications data from “Company 1?–a large national catalog retailer that sells apparel and accessories–they confirmed that ignoring product return behavior, or even trying to discourage it directly by not marketing to customers who return
products (such as by not sending them catalogs), would be a mistake. In fact, managers should embrace
customers’ product-return behavior and offer them a satisfactory experience.

In a field experiment with a second catalog retailer, “Company 2,” which sells footwear, apparel and
other accessories through the Internet and mail-order catalogs, the authors found that under a lenient
product-return policy, customers’ purchases, induced profits and referrals were greater than under a
strict policy (which discourages and limits product returns). These measures could be raised even further through a catalog-mailing strategy that takes into account the expected future profits from each
customer and the relationship between purchases and product-return behavior–i.e., through an optimal
allocation strategy.

Purchase Options

Educator and Student Discounts Available. Learn more »

  BENCHMARKS  
Loading Time: Base Classes  0.0004
My Controller Construct  0.0003
Build Nav  0.0006
Controller Execution Time ( Products / Route )  0.0445
Total Execution Time  0.0450
  GET DATA  
No GET data exists
  MEMORY USAGE  
1.5724 MB
  POST DATA  
No POST data exists
  URI STRING  
store/can-product-returns-make-you-money
  CLASS/METHOD  
products/route
  DATABASE:  MITSLOAN_DEV   QUERIES: 68  (Hide)
0.0003  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  '8d310a1c02a06f3748aecd0a17642067'
ORDER BY `created_at` DESC 
0.0002  

SELECT SQL_CALC_FOUND_ROWS cat_id
FROM (`product_categories`)
WHERE `status_id` =  'A'
AND `url_friendly` =  'can-product-returns-make-you-money'
AND `parent_id` =  1 
0.0049  

SELECT c.parent_id, c.format_id
                    FROM products AS p, products AS c
                    WHERE p.prod_id = c.parent_id AND
                        c.avail_id IN ('A','B','D') AND
                        c.type_id = 'V' AND
                        (
                            c.sku = 'can-product-returns-make-you-money' OR
                            if(c.format_id = 'Certificate', '', p.url_friendly) = 'can-product-returns-make-you-money'
                        )
                    LIMIT 1 
0.0002  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  805 
0.0003  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '805' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '805'
ORDER BY `sort` ASC 
0.0001  

SELECT `cat_id`
FROM (`product_categories__products`)
WHERE `prod_id` =  '805' 
0.0001  

SELECT *
FROM (`product_flags__products`)
WHERE `prod_id` =  '805' 
0.0001  

SELECT `sku`
FROM (`products__xsell`)
WHERE `prod_id` =  '805'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0198  

SELECT `products`.`parent_id`
FROM (`transaction_lines`)
JOIN `products` ON `products`.`sku` = `transaction_lines`.`sku`
JOIN `product_categories__products` ON `products`.`parent_id` = `product_categories__products`.`prod_id`
WHERE `products`.`avail_id` =  'A'
AND TO_DAYS(transaction_lines.updated_at) < (TO_DAYS(NOW()) - 90)
AND `product_categories__products`.`cat_id` IN ('247') 
GROUP BY `products`.`parent_id`
ORDER BY COUNT(*) DESC
LIMIT 6 
0.0002  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '1211' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '1211' 
0.0003  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '1211'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '305' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '305' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '305'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '1325' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '1325' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '1325'
ORDER BY `sort` ASC 
0.0002  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '523' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '523' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '523'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '3987' 
0.0001  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '3987' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '3987'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '339' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '339' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '339'
ORDER BY `sort` ASC 
0.0003  

SELECT SQL_CALC_FOUND_ROWS media_id, position
FROM (`media`)
WHERE `foreign_key_table` =  'products'
AND `foreign_key_column` =  'prod_id'
AND `foreign_key_value` =  '805'
AND `kind` =  'image_600x600'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0001  

SELECT *
FROM (`media`)
WHERE `media`.`media_id` =  '391' 
0.0001  

SELECT *
FROM (`mime_types`)
WHERE `mime_types`.`extension` =  'jpg' 
0.0001  

SELECT *
FROM (`media_metadata`)
WHERE `media_id` =  '391' 
0.0002  

SELECT SQL_CALC_FOUND_ROWS media_id, position
FROM (`media`)
WHERE `foreign_key_table` =  'products'
AND `foreign_key_column` =  'prod_id'
AND `foreign_key_value` =  '805'
AND `kind` =  'gallery_image'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0004  

SELECT *
FROM (`products`)
WHERE `avail_id` IN ('A', 'B', 'C', 'H') 
AND `parent_id` =  '805'
AND `type_id` =  'V'
ORDER BY IF(position = 0, 1, 0) ASC , `position`, `title` 
0.0001  

SELECT `c`.`format_id`, `c`.`price`, `c`.`sale_price`
FROM (`products` AS c)
WHERE `c`.`prod_id` =  '806'
LIMIT 1 
0.0002  

SELECT SQL_CALC_FOUND_ROWS media_id, position
FROM (`media`)
WHERE `foreign_key_table` =  'products'
AND `foreign_key_column` =  'prod_id'
AND `foreign_key_value` =  '806'
AND `kind` =  'thumbnail'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0003  

SELECT `product_categories__products`.`cat_id`
FROM (`product_categories__products`)
JOIN `product_categories` ON `product_categories__products`.`cat_id` = `product_categories`.`cat_id`
WHERE `product_categories__products`.`prod_id` =  '805'
AND `product_categories`.`parent_id` =  1
AND `product_categories__products`.`cat_id` NOT IN (1, 261)  
0.0004  

SELECT `cat_id` AS id, `parent_id` AS parent, `status_id`, `name`, `description`, `url_friendly`, `page_title`, `meta_keywords`, `meta_description`, `position`, `updated_at`
FROM (`product_categories`)
WHERE `cat_id` != 1
ORDER BY `parent_id`, IF(position = 0, 1, 0) ASC , `position`, `name` 
0.0003  

SELECT *
FROM (`product_categories`)
WHERE `status_id` =  'A'
AND `parent_id` =  1
AND `cat_id` NOT IN (1, 261) 
ORDER BY `name` 
0.0002  

SELECT *
FROM (`site_settings`)
WHERE `option_key` =  'announcement' 
  HTTP HEADERS  (Show)
  SESSION DATA  (Show)
  CONFIG VARIABLES  (Show)