5 Tips On How To Reduce Chargebacks
Unsatisfied customers will always be a reality for online merchants. Regardless of how much you focus on delivering stellar products and exceptional customer support, some of your customers will still demand their money back.
The reasons for that are diverse. It might be that you’re communicating your product’s features the wrong way. It might be an isolated shipping error. In some cases, the customer simply has buyers’ remorse. Whatever the reason, the reality is that unhappy customers are here to stay.
And while mounting refunds can affect your bottom line, it’s chargebacks that really cause damage.
The sad thing is that many transactions are reversed by the bank when a simple call to customer support could have resolved the issue for the customer. And because of that, you probably won’t be able to fully eliminate the issue of chargebacks. But by working to manage customer expectations and keep them happy, you’ll be able to reduce the risk of chargebacks and take your online store to the next level.
What is a card chargeback?
A card chargeback is not a refund. Refunds are when your unhappy customers contact you to ask for their money back in exchange for sending the product back to you.
A card chargeback on the other hand is when consumers contact their bank to ask for a reversal of the transaction they made. Basically, they ask their bank for their money back. The window for doing that is also considerably larger than for a refund, sometimes even going up to 90 days.
After a chargeback request, the bank will do some investigation into the transaction and if they find the request to be valid, they’ll reverse the transaction. The worst part for you, as the merchant? This process doesn’t even mandate the customer to return a product, if it was ever shipped.
Of course, banks won’t just randomly proceed with chargebacks if nothing was wrong with your product or shipment. But since this process is out of your control, it’s important to do what you can to reduce card chargebacks in their tracks and keep your customers happy.
Let’s see how you can do that.
How To Reduce Chargebacks
Apart from instances of fraud, chargebacks are usually the result of unhappy customers. As a result, any effort to improve your customer experience is bound to improve your numbers and keep you safe from card chargebacks.
Chargebacks aren’t just a nuisance, they can actually be damaging to your business. If the chargeback goes through, it could harm your relationship with the bank, particularly if it starts to happen on a regular basis. This is a potential snowball, so you want to keep it in check as fast as possible.
Considering that, let’s look at some more specific tips on how to reduce credit card chargebacks.
1. Outstanding Customer Support
Many problems that lead to card chargebacks arise from poor communication with your customers. Customer support should be on point to solve any and all problems that arise, from shipping times to proper product use.
Make sure your support department is helpful and easily accessible, as fast as possible. The last thing you want is a discontent customer not being able to get through to an agent.
But you can take it a step further. Consider having a live chat support even before the actual purchase. This works extremely well if you sell tiered subscription plans for an online product, since it can help ease a potential customer’s objections, or it can even answer potent questions about your pricing scheme.
Whatever you do, understand that communication is key to stopping card chargebacks, even before they start to happen. Invest in your customer support department and give it the tools to succeed.
2. A Clean Backend
Miscommunications between your employees and delivery companies, or even shipments of the wrong product are both reasons for card chargebacks. While the odd error is acceptable, and it shouldn’t threaten your overall company performance, these errors shouldn’t be a norm. If that’s a problem right now (or if you’re afraid it might become a problem in the future) spend some time organizing your backend.
Good data management and easy to understand workflows are fundamental for a good customer experience. If you’re bootstrapping a dropshipping business, get an excel whiz to help out with some management tools. If you’re already a step ahead, maybe you even have your own warehouse, you can even consider investing in ERP software, or hiring a consultant to help you out.
Just make sure you limit the amount of errors and miscommunications from your end, so the banks don’t have reasonable grounds for a chargeback.
3. Be Transparent and Specific
If you can’t live up to an attractive delivery time promise, don’t feature it on your website. Transparency about your processes, refund windows and product capabilities are important for two reasons.
First, because your customers know what to expect. As long as they know what they’re getting, there’s no reason to ask for a chargeback. Second, because banks won’t have grounds for issuing a chargeback if your processes and product feature are honestly displayed.
However, that might not always be enough. Unconscious biases and expectations can play a role in your customers’ expectations, especially when your copy is overly salesy. So make sure that your product descriptions are as specific and accurate as possible, without overselling anything, not even implicitly.
4. Keep a clean fiscal record
Chargebacks aren’t a magic card for consumers. It’s the bank that decides whether a chargeback is warranted or not. While they will check what happened with a particular transaction, your fiscal record and relationship with the bank will definitely play a big role in this.
If you have a history of missed payments, or even a bad credit score if you operate out of the US, the bank is more likely to issue that chargeback. Pay bills on time, only go in debt when you can manage it, and you’re one step ahead of chargebacks.
5. Funnel people towards a refund
Flawless products, effective data management and stellar support won’t always keep you covered. Sometimes, there’s nothing you can do about a discontent customer. But ask yourself this: would you rather have to pay a refund, or suffer a card chargeback?
In pretty much every case, the refund is better. You still don’t earn money off of that sale, but at least it doesn’t go down as a black mark against your business.
So extend your refund period to support problems that may arise in the long term, and make refund requests accessible. When you must take a loss, it’s always better to minimize the damage, and you can now do it better with these 5 tips on how to reduce chargebacks.