Use ‘gifts’ to reduce product returns

To cut product returns up to 50%, frame a promotion as a free gift (Buy X and get Y for free), not a bundle (Buy X and Y at a special price).

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📝 Intro

Say you buy from one of these two promotions:

• Buy a blazer and a matching tie for $60.

• Buy a $60 blazer and get a matching tie for free.

They are the same thing, just framed differently.

Now imagine that soon after you buy the offer, you come across a similar blazer that’s slightly cheaper.

Which of the two different promotions would make you less likely to return the first blazer you bought, and buy the other one instead?

Here’s what scientific research found.

P.S.: Debating whether you should offer free returns? Maybe your short-term metrics show that they’re lossmaking. But here’s why you should probably still offer them.

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Previous insight: The science of product selfies (Previous insights here)

Framing a promotion as a “free gift” instead of a bundle decreases returns

Channels: Promotions | Ecommerce | Shipping | Returns
For: B2C
Research date: September 2018

📈 Recommendation

When running a product bundle promotion, frame it as a “gift” (Buy X for $49, get Y free), versus a bundle (Get X and Y for $49). You will drastically reduce returns of your product and cut your costs.

For example:

• “Buy a TV for $500 and get a free speaker”, not “Get a TV and speaker for $500”

• “Buy a business class ticket for $1000 and get a hotel night free”, not “Buy a business class ticket and one night’s hotel stay for $1000”

Pro tip: Test offering your main product as the ‘free gift’ in a promotion (e.g. buy a tie and get a matching blazer). Research found it can increase sales by 78%.

🎓 Findings

• Framing the second product in a promotion as a free gift, instead of as part of a bundle package, makes people less likely to return the products.

• As part of a series of 4 experiments:

  • People said they were over 2x more likely to return an item in a bundle promotion (30%) as compared to something that came with a free gift (14%), when asked about past experiences

  • People were given one of two scenarios – “buy a sweater for $49.90 and get a free scarf” or “buy a sweater and a scarf for $49.90”. They were more likely to return the sweater in the second scenario (4.98/9 vs. 6.10/9)

🧠 Why it works

• We receive value in two main ways – utilitarian benefits (e.g. saving money, convenience) and hedonic benefits (e.g. excitement of trying something new, being entertained).

  • For a bundle promotion we understand and judge what we’re losing by returning it based on the utilitarian benefit - how much money we saved through the deal

  • For a free gift promotion however, on top of the monetary savings value, we also enjoy the value of a fun freebie - a hedonic benefit

• So when we buy a “gift” promotion, we feel we got more value out of it, and are less likely to return it (and lose that value).

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✋ Limitations

• This effect only works with brands people are already familiar with. That’s because the wording of the promotion changes what people think they are losing out on by returning the product. This isn’t effective when people are less certain about the product’s value, such as when buying from a new brand.

• The study looked at situations in which the secondary item was cheaper than the main product. If both have the same value, like a “Buy 1 Get 1 Free” or “50% off” promotion, it’s unknown if the same dynamics would apply.

• Framing a promotion as a free gift can cause problems if you want to sell the second item separately later on. Bundle promotions make customers more willing to pay for a product or buy it again, as compared to getting it as a free gift with another purchase.

🏢 Companies using this

• Brands use “free gift” promotions all the time to generate buzz, increase cart sizes and reward customers. It’s unclear whether they use it to reduce returns. For example:

  • Time Magazine offers customers a free travel bag to renew their subscription

  • Electronics website Newegg often offers free gifts and gift cards alongside purchases of big ticket items

  • Domino’s and other pizza chains offer free sides to go alongside large pizza orders on special days

  • Tea brand Twinings offered a special promotion in Singapore, giving a free tea cup to customers who purchased a 2-pack of their flavored teas.

Lancôme takes it a step further, letting customers choose their gift from a range of products.

⚡ Steps to implement

• Review your bundle promotions, and check whether product returns are a priority to address.

• Select the item of lower value in the promotion, and frame it instead as a gift in your messaging.

• Be careful, if you want to sell the “gift” separately in the future, this type of promotion will make it feel less valuable and hurt future sales of the item when sold alone.

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🔍 Study type

Lab and online experiments.

📖 Research

“Retail is detail! Give consumers a gift rather than a bundle”: Promotion framing and consumer product returns. Psychology & Marketing (September 2018). 

🏫 Researchers

• Shinhyoung Lee. Seoul National University.

• Youjae Yi. Seoul National University.

Remember: This is a scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.

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