In today’s blog post we’re going to examine some of the key reasons for a high product return rate, so you can understand what it is and how to prepare to reduce your risks.
What’s a high product return rate?
Let’s discuss what a high product return rate is.
This is very far from a return on investment, in fact, as a manufacturer of products you absolutely do not want this kind of return!
Typically when you launch the product you’ll experience the highest rates of failure in the first 30 days. Unfortunately, sometimes you’ll have a high product return rate because the product design was not quite mature enough and there are a lot of minor issues that you didn’t expect that ended up in the field. So when there’s an issue, customers will start complaining and returning the product. This is the return rate.
However, no matter what you do, sometimes serious issues related to design, manufacturing, material and component, or supplier-related problems get forgotten or missed and end up causing problems once the product is in users’ hands.
By the way, this can happen to any business, large or small. We already wrote about an enormous GE product recall for faulty fridges, but more recently in 2017, Harley Davidson motorcycles recalled around 50,000 motorcycles due to a defect resulting in oil leaks.
The return rate here was caused by defective production processes not being caught on the assembly line, so a manufacturing issue:
According to documents released by the National Highway Traffic Safety Administration, the oil line clamps (part numbers 10198, 10080 and 10344) on motorcycles produced from July 2, 2016 to May 9, 2017, may not have been installed correctly. This may cause an oil line to dettach, resulting in a sudden loss of engine oil. Harley-Davidson attributes the problem to a missed operation by assembly line workers.
This resulted in 9 reports of problems caused by a detached oil line, including 2 crashes. Luckily, riders escaped with minor injuries. But still, the cost of this recall must have been enormous, not to mention the damage to Harley Davidson’s reputation.
Reasons for a high return rate
There are a lot of reasons why products end up having a high return rate after launch, and as a manufacturer, it pays to be prepared so you can avoid these when developing and manufacturing your new product. Also, what should you do if you encounter these returns?
1. Customer remorse
This is a very common reason for returning products. Arguably, the most common as most companies may have around 50% or more returns for this reason. In some cases, we call those ‘no trouble found’ (NTF) returns or, sometimes, ‘no problem/failure found.’ These are returns that are perfectly good products with no issues found following internal testing and investigation.
It’s when customers purchase a product and, all of a sudden, they change their mind after a short while, deciding that it’s not for them. They usually return it undamaged and in good working order, however, in today’s world to make sure that you’re not legally liable if a resold product causes injury or damage, you really shouldn’t usually put it back on the shelf right away (and cannot in the USA, at least, if the seal of the package has even just been opened). So even though it’s a case of customer remorse and there’s nothing wrong with the product, you’ll need to check it before you accept the return and will need to run the product through manufacturing quality tests in order to authenticate and validate that it is definitely okay. Following that, it can be repackaged and resold.
Because the return needs to be tested, repackaged, possibly refurbished, given a software update, etc, this still has a financial impact on the business and it can take several days or a week or more to get products back onto the shelf and resold (often at a lower cost if they have been refurbished). Therefore, this ‘no-fault return’ is still something that we want to avoid.
2. Gift returns
Another common return reason is gift returns. This is when customers are gifted the product, but they don’t really like it and want to return it for a refund so they use the money on something more suitable.
These returns are similar to buyer’s remorse, and some companies mix the two into one category, but this isn’t always advisable, because oftentimes the package for a gift return has not even been opened at all. If the package has not been opened, the product can likely be sold again as new immediately. However, if it has been, then a similar testing process will need to be undertaken as with buyer’s remorse returns.
3. DOA products
Another common return happens because the products are ‘dead on arrival.’ DOA products may occur because during the design and development a lot of times the manufacturer or product managers forget that the product needs to be properly transportation tested, commonly to the ISTA-2 standard. This will find any issues with the product caused by vibration or drops during its transportation and handling, as well as thermal and environmental temperature changes at the same time. For example, when shipping from China to the USA by plane or container these variations in temperature and handling drops and vibrations can cause product damage. So if the product can’t handle that sort of minimal vibration or small short drops, such as a 10cm drop, then you’ll end up with products that have a lot of failures once purchased by customers.
To alleviate that you can perform package drop tests on your product as well as temperature and humidity and vibration tests. These will help your product to be more durable and have fewer and fewer DOAs once in the field.
4. Poor quality products
The next reason for a high product return rate is poor quality.
This is when the customer purchases the product, takes it home and uses it. They might immediately see a crack someplace or a missing screw or, after turning it on realise that it’s not functioning exactly how it should. Basically, the product is defective right out of the box or within a very short time.
Doing the right product qualification testing during the NPI process will reduce the chances of poor quality products making it into the field.
5. Unreliable products
Poor reliability products are also a leading reason for product returns. Initially, a product may be fine, meaning that out of the box it looks and functions perfectly. However, shortly afterwards, maybe within two or three months and still within the warranty period, it breaks down or doesn’t function to specification. Quality issues are usually found a lot faster and may be more clearly visible, whereas reliability issues tend to manifest themselves after the product has been used for a while.
Returns within the warranty period are understandably costly for the manufacturer, so performing comprehensive reliability testing during the NPI process is a must.
Conclusion
After the product is launched, DOA and poor quality products will usually become very apparent quite quickly after the first products have been sold. Poor reliability products may take a little longer to identify and returns due to customer returns or unwanted gifts can happen at any time after launch.
To avoid these returns you must identify the specific reasons affecting your product and then implement a plan of action to fix these issues once they occur, which we’ll discuss in the next post on this topic.
We’ve also explored 7 Secrets Behind Low Product Return Rates before, too.
Confused? Need help?
As mentioned, the return rate you finally have is related to work done during the new product development period of your new product. The product design and validation need to be thorough in order to reduce the risk of future problems and this is what we support Agilian customers to achieve by following a proven process in our facility.
Speak to us about your new product and we will offer you some no-strings advice on how best to get it made!
