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Which customer would you give a refund to?

If you run a business, or are employed in one, allow me to put three scenarios to you this Sunday. Think about your answers carefully.

Scenario One: an unhappy customer comes to you. She is dissatisfied with the product she bought, because it doesn’t work. You study the situation, and conclude she is right. Should you refund the money?

Scenario Two: an unhappy customer comes to you. He is dissatisfied with the product he bought, because it doesn’t work. You study the situation, and cannot conclude whose fault it is. Perhaps the product was defective from the outset. But perhaps this customer did something to ruin it, and isn’t saying so. Should you refund the money?

Scenario Three: an unhappy customer comes to you. He is dissatisfied with the product he bought, because it doesn’t work. You have never had this particular product fail before. This customer is belligerent and unpleasant, and is known to be a perennial complainer. You wouldn’t mind losing him one bit. Should you refund the money?

Most of you, I hope, would readily refund the money in Scenario One; most of you, I predict, would be reluctant to do so in Scenario Two; and pretty much none of you would refund that pain-in-the-backside customer of Scenario Three.

I think you should refund the customer in all three scenarios.

If you’ve calmed down, we can continue. Scenario One is a no-brainer. If the customer is right and you have supplied a bad item, you should refund. You want happy customers who return to you, after all. Losing a bit of money on the refund is nothing compared to the value of a lifetime customer.

Scenario Two is more contentious. If you don’t really what the truth is, you might want to try to negotiate and share the loss. But that would be a mistake. If there is the possibility it is indeed your organization’s fault, bite the bullet and refund. Demonstrate to the customer that you are serious about what you do and want to do it to the best of your ability, and regret supplying anything that doesn’t do exactly what was paid for. Refund, and make the customer see he’s dealing with a superior type of business.

Scenario Three. Say what? Refund money to a customer who’s probably trying to scam you? Why on earth would you do that? Isn’t it better to lose this customer altogether?

It probably is. But not yet. In the first instance, and if the money in question is not significant, just give the refund. If this customer proves to be a serial refund-claimer, act decisively in future and show him the door. But not the first time. Stay on the high road, and give the money back.

Why so? In Scenario Three, you aren’t trying to demonstrate something to that customer, who will probably turn out to be a dead loss in future anyway. You are demonstrating it to your staff. You are showing that customer happiness is paramount in your business, and that you give the customer the benefit of the doubt first, not the other way around.

You’re allowed to disagree. You’re allowed to say a policy like that would just encourage fraud, both by customers and staff.

My point is that if you truly want to be a business that delights customers, you have to demonstrate it every day and back it up with hard action. Otherwise it’s just another empty slogan. Put your money where your mouth is. The world’s best companies, the ones who really bond with customers for life, do just that. They instal quality-control procedures that filter out bad products early; and they give the refund when they have to. It pays big, eventually.

But ignore me, stay shrewd and shrill and small. Point to the sign on the wall that says “Goods once sold cannot…”

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