The Dreaded Refund

By Brian Henderson posted 07-27-2018 16:29

And Why It’s Really Not All That Terrible – If Handled Correctly

I have some terrible news for you. I hate to be the one to break it to you, but I find myself compelled to let you know…

Someone on your team is going to make a mistake. Or an accident will happen. Or a customer will be just plain dissatisfied.

If your laundromat business is currently offering a wash-dry-fold service or you are considering adding one, it is an unavoidable fact that some mishap will occur. You may even be the one who makes the mistake. An article of clothing will be ruined, a pillow will explode in the wash, a bag will be mislabeled or handed out to the wrong person, a comforter will be scorched, or an entire order will be misplaced or stolen. Something will go wrong. It is going to be unpleasant. It will be embarrassing. It will probably cost your business some money. And it will likely fall on you, the laundry owner or manager, to resolve this problem.

If you’re anything like we were in the early days of my family’s business, you likely handle these situations personally, on a case-by-case basis. You assess what happened, communicate with the customer, and negotiate with them to come to a resolution that satisfies both parties to the best of your ability. Often, it’s not a horrible exchange and you, the business owner or manager, feel proud that once again your drive to do the right thing by the customer has served your company well.

There is a certain level of business economic activity underneath that makes sense for you to personally handle such situations – and certainly in the early days, as you explore what this service is all about, you should get that first-hand experience. We did it this way for years. However, as your business grows and you become increasingly dependent on employees to fulfill drop-off laundry orders, every time a mishap occurs and you rush to the rescue to resolve it, you feel instantly stressed and your energy is drained.

Naturally, you’re going to do whatever you can to help avoid mistakes being made in the first place. A sound strategy and one that we used while growing my family’s laundromat into a chain of three stores was to document every step of the wash-dry-fold process in a narrative fashion, and then boil it down to simple teachable steps. Each time a mistake was made we would refine the process. In the early days, it was mostly just myself, my dad, my brother, and a few other employees doing the work, so it was easy to hammer out the details.

But something was still missing. I was still feeling stressed each time one of our attendants couldn’t resolve a mishap and it was up to me to fix it. That stress only continued to grow as we built additional locations and expanded our team. I went looking for answers and, as usual for me, I found those answers in a book.

“Exceptional Service, Exceptional Profit: The Secrets of Building a Five-Star Customer Service Organization,” by Leonardo Inghilleri and Micah Solomon, states that the formula to crafting an exceptional customer service experience for your customers consists of delivering the following:

1. A perfect product
2. Delivered on time
3. From people who care
4. With an effective problem-resolution process (because something will go wrong eventually)

Inghilleri and Solomon insist that thoroughly training your team on a carefully crafted problem-resolution process is just as important as not making any mistakes in the first place. In fact, it may be more important, because the way in which your team handles a problem is often a better opportunity for your organization’s customer service skills to shine in the eyes of the customer than during the course of regular business activities. On the other hand, if there is a mad scramble or the ball is dropped in resolving a customer’s complaint quickly with ease, then your team has just made a bad situation worse.

This was an eye-opener for me. I quickly realized that our system was missing that fourth step of building and teaching an effective problem-resolution process. That was why I was feeling stressed and things felt out of kilter – our service was missing a leg!

I think what threw me off and why I had not identified this shortcoming was that the exact nature of the mishaps were different each time. If we had experienced an identical mistake every day, it would have been easy to identify and we could have taught the proper technique to avoid it. It was the inconsistent and unique nature of the mishaps that initially led me to resolving each situation myself.

However, thanks to the concepts shared in “Exceptional Service, Exceptional Profit,” I began to view these problems in a new light. Viewed from a distance and with enough time and experience, certain patterns appeared, which allowed me to build a system for effective problem resolution and to teach it to our team. We are still refining our process and I don’t think we will ever have a perfect system, but the steps we have taken so far have gone a long way to making our lives better and management easier. We have found that by being exceedingly generous within certain bounds has created a system of swift problem resolution with excellent customer satisfaction, while keeping costs and distress to a minimum.

The first layer of problem resolution we teach our team is our preferred order of operations. When a problem occurs, we don’t go straight into refund mode! Instead, laundry attendants are taught – if there is any way we can resolve a problem by offering to redo an order or by offering some other non-monetary solution – to pursue that first. Although there is a cost in labor, all the team has really lost is some time.

The next level up from that is to offer store credit for our wash-dry-fold service. A computerized point-of-sale system will help greatly with tracking this information, as you can either store the credit with a customer’s profile or issue a gift card or voucher; but this can even be done with a paper-based system, albeit with a great deal more effort. For regular drop-off laundry service customers, store credit is a great bargain because the impact to their finances is larger than what offering the credit costs your business.

The next level to issue a cash or credit card refund to the customer for your services.

And the final level is refunding the customer the retail value of the items that were lost, stolen, or damaged. This top level doesn’t occur often, but we have paid it before when the situation called for it.

Regarding damaged items that a customer claims are beyond repair, we typically insist that the customer leave the item with us for which we are paying used-item retail price compensation. This sometimes will help the customer determine if the item is truly unsalvageable, or if they would prefer store credit.

Although every situation is a bit different, we’ve taught our attendants a pattern in the way in which we want problems resolved. I realized when developing this system that the steps neatly follow a useful acronym that I call “the C.A.R.E. method.” It stands for Communicate, Apologize, Redo/Refund, and Encourage.

Communicate: The first step is to communicate with the customer using active listening skills and to thoroughly explore the problem before offering any solutions. Active listening entails repeating back to the customer what they said the problem was – this either lets them know their concern has been heard or enables them to correct the attendant in clearly understanding the situation. Sometimes the customer will tell you what would solve their problem if you just ask them, and it usually will not cost as much as you expect them to ask for in compensation. Often, customers just want someone to know that there was a problem and aren’t actively seeking any form of compensation; they just don’t want the problem to happen again. This must be met on behalf of the team with deep gratitude. I will speak more on this later.

Apologize: This step is self-explanatory, but younger employees new to customer service may need to be taught the nuances of an effective apology to the customer, even if it “wasn’t their fault.”

Redo/Refund: This step is where attendants follow our preferred order of operations regarding customer compensation. This is one of the key components of providing our attendants the tools they need to resolve customer complaint issues without the need for management involvement in the solution.

Based on experience, we decided to empower our team members to issue up to $50 in store credit or refunds as they see fit without prior management approval. The store credit or refund needs to be thoroughly documented for later review, but if the problem can be resolved for less than this amount, we have decided it doesn’t require a decision “from the top.”

Does that mean the most an attendant can refund is $50? Does it mean every refund is always $50? Absolutely not.

The dollar amount is simply used as a measuring stick to help the attendant decide when exactly to get management involved, versus solving the issue for the customer on the spot. If the solution looks like it will cost the company more than $50, the attendant asks the customer for their full contact information, confirms that the situation is thoroughly understood by both parties via active listening skills and writing down the details, and informs the customer that management will contact them within 24 hours to address the issue. (As a side note: The first response many laundry owners have when I share this largesse we empower our attendants with is one of deep concern that the cost will be too high. I refute this based on experience. We are extremely generous with drop-off laundry refunds when it is called for and do not require our employees to negotiate with customers very much – and yet, within the past year, refunds have cost our company a whopping 0.1 percent of our total gross income. That’s not exactly breaking the bank. This small financial impact, versus our local reputation and gross income, has been more than worth it.)

Encourage: We give the customer a reason to come back and encourage them to try us again. One good method we have found is that, while entering a customer’s store credit into our point-of-sale system, we inform them that the next time they visit their order likely will be free, due to their typical order size compared to the amount of credit we are giving them. We insist that we want their business, that we enjoy having them, and that we would like to make it up to them and prove we are their best choice.

The final layer of teaching effective problem resolution to our team is one of proper attitude; namely, gratitude. A customer complaint is actually a good thing! It’s easy to get wrapped up in frustration that a problem occurred or that a customer is bringing a complaint to your attention.

However, the fact of the matter is that customers have a choice. They could simply leave and never return. Without a word, they could disappear without informing you that something went wrong. And there you’d be, happily carrying on with your business, saying: “No complaints today!” But, in truth, your drop-off laundry service may be slowly dwindling and losing customers.

A complaint is an opportunity to make things right. It is a vote of confidence from your customers, who are saying, in essence, that they want to do business with you again, but they must first be assured that things will be made right or that an avoidable mistake will not be made again. When a complaint is met with a smile and gratitude from an attendant for the opportunity make corrections and to serve the customer better next time – rather than with surly defensiveness – your laundromat’s wash-dry-fold service just rose in that customer’s esteem to a level that’s hard to beat.