Can A Refund Differentiate A Business?

A reader recently shared a story with me, partly because she knew I would be interested and partly because she had to tell the world. She bought a sweater set in Talbot’s, an upscale ladies’ specialty store. She had initially bought it for a trip but did wear it once before the trip. She loved it! It felt good, it was flattering, and the bonus was she got multiple compliments when she wore it that one time.

She packed up her new favorite sweater for her trip and off she went. When she arrived at her destination and unpacked, she realized that something in her suitcase had leaked all over her sweater. With a closer investigation she determined that her hairspray that was the culprit. She brought the set to the dry cleaners in the hopes of saving her prized possession.

The shell of the sweater was fine but unfortunately the outer sweater came back from the cleaners with multiple dark spots. The dry cleaner had warned her that hair spray has a tendency of leaving spots and sympathized with the results.

She was upset with herself for not putting the hairspray in a plastic bag but she loved the outfit. So she took her set back to Talbot’s — NOT for a refund, because after all it was her fault. She just wanted to replace the damaged outer part in the same color that matched the shell. Unfortunately, the store no longer had the outer part, but the sales associates realizing how disappointed the customer was, went on a mission to find the set. She succeeded and had the full set shipped to her store.

The customer was delighted but also expected that from Talbot’s. She was a good customer of that store although she had never seen that sales associate before. She explained it is just the way they do things there. If that sales associate had done less than that she would have been disappointed. What happened next was the differentiator. The associate took the original item back and started to give the customer a refund. The customer stopped her by saying that it wasn’t Talbot’s fault for her leaky hair spray can. But the associate insisted that the store issue a refund for the original set, as if to ease the pain of her misfortune.

This reader was so impressed by the behavior she hasn’t stopped talking about this experience. She even insisted that when I write this piece to make sure I mention Talbot’s by name. Here is the question — did Talbot’s have to give back the money? No, absolutely not. Should the sales associate have issued the refund? Does Talbot’s really have a policy of giving money back in that situation?

It doesn’t make any difference what your answer is because the bottom line is Talbot’s differentiated itself by doing something most stores wouldn’t do. This customer, who already shopped Talbot’s regularly, became a disciple after that experience. She has told the world and shared the experience with me, knowing that I would publish her story. Her analysis of the experience was that it showed that Talbot’s cared more about her as a customer than making a single sale.

I don’t know if I agree with her assessment on caring but I might be wrong. However, the one thing they do understand better than most is the lifetime value of the customer which is worth more than any single purchase. The other lesson from this experience is that it is a classic differentiating issue. Do something that most retailers wouldn’t do. Something that’s not an accepted procedure. Many stores would go the extra mile to track down merchandise for a customer. Although that’s nice, it doesn’t generate the word of mouth buzz, the WOW or the differentiator that the refund did. Yes, I know there will be people who will take advantage of a store’s liberal policy but if you focus on the cheaters, the needs of your customers will never be met.

Hats off to Talbot’s and the sales associate for making a mundane experience memorable and for giving a great example of what differentiating is really all about.