According to Clearly Payments, the average customer dispute rate is 0.60% across all industries. While this number sounds small, those disputes could severely affect your brand’s reputation if you aren’t careful. And once your reputation is gone, it’s hard to get back.
This article will look at how customer disputes affect your brand and what to do to reduce them.
What is a Customer Dispute?
A customer dispute, also known as a “chargeback,” occurs when a cardholder challenges a payment on their transaction. This typically involves the cardholder asking the bank to reverse the charges. Companies like Chargebacks911 were created to cut down on the frequency of customer disputes, as they found that chargebacks greatly impacted business profits.
Why Do Customers Make These Disputes?
If you’re a credible merchant who has a solid, customer-focused return policy, there are very few reasons why a customer should make a dispute before reaching out to the merchant first.
However, the customer would be in the right if they tried to reach out to the merchant for a refund and received no reply or if the merchant refused to offer a refund in a valid circumstance.
Unfortunately, customers usually file these disputes for the following reasons:
- The goods arrived slower than expected
- The package arrived damaged or opened
- The merchant charged the wrong amount
- The buyer used a stolen credit card
- The buyer thought a valid charge was invalid
- The consumer felt buyer’s remorse
- The businesses’ affiliate charged back an amount
- The product received had an inaccurate description
- The buyer wants to end their subscription early
- The buyer is trying to get something for free
Even in cases where the customer is making an illegitimate chargeback, your brand’s reputation could still be negatively affected. The more chargebacks occur, the more serious the drop in reputation becomes. Both your customers and payment processors will find it hard to trust you.
How Chargebacks Affect Your Business Reputation
Chargebacks negatively affect merchants and all of the merchants’ customers, whether they’re causing the disputes or not. And when customers are unhappy, they make their opinions known.
The Impact of Chargebacks on Customers
It’s hard to feel sorry for customers that are stealing money from your business, but they’re impacted by disputes, especially if the disputes are frequent. Chargebacks aren’t the best solution for resolving issues with purchases, as they’re time-consuming and complicated.
Customers typically have to provide evidence, wait a while, and then face repercussions from the merchant or the card issuer. For example, a customer that uses chargebacks could be seen as dishonest, fraudulent, or abusive. This would cause them to pay higher fees and interest rates when they try to get another credit card, and this could make them blame the merchant.
An angry customer could leave negative reviews, stating that the reason why they asked for a chargeback was due to a poor refund, customer service, or terms of service policy. And if that statement is true, customers are less likely to trust you, your products, and your descriptions.
The Impact of Chargebacks on Merchants
It’s clear that poor reviews and a lack of customer satisfaction would negatively impact your business, but this isn’t the only way chargebacks damage your brand’s reputation. While a chargeback here and there would make you lose revenue from the sale, consistent chargebacks would eventually hurt your relationship with payment processors and card networks.
When your relationship is on thin ice, the payment processor and customers will think your business lacks security or quality. From there, your merchant’s credit score will decrease, increasing your processing costs or leading to the termination of your merchant’s account.
The best thing merchants can do to protect their reputation is to implement best practices to reduce chargebacks. There’s no real way to get rid of them entirely, but when a chargeback does occur, you’ll have what you need to dispute them and regain the trust of your customers.
How to Resolve Disputes and Protect Your Reputation
If we look back at the reasons why customers typically make disputes, we can assess how to prevent the chargeback from happening. Here’s how to resolve potential customer disputes.
Tighten Up Your Return Policy
A poor or expensive return policy could cause the customer to file a chargeback. It’s actually much better to pay for returns, increase the return window, or work to prevent them if you want to cut back on returns. One way to do this is by writing accurate product descriptions.
Optimize Your Fulfillment Practices
If your delivery was late or the item arrived damaged, it’s possible that your supplier or delivery company isn’t reliable. While getting a new company may be beneficial, you should also think about packing your goods correctly and shipping your items out as soon as possible.
Use Fraud Prevention Tools
In cases where the buyer used a stolen credit card, or you’ve chosen a bad affiliate, fraud prevention software can help. For example, AVS, CVV, and 3DS technology could weed out fraud attacks. However, you should also vet your affiliates before working with them.
Remind Customers of Recurring Payments
Customers may chargeback a recurring payment or purpose or by accident. To solve this, remind them when the next charge is coming out of their account. It also helps to clarify billing descriptors and prominently display contact information, so customers can reach out to you.
Fight All Illegitimate Chargebacks
Some chargebacks you can’t prevent, like friendly fraud, buyer’s remorse fraud, or cyber shoplifting. In these cases, the only thing you can do is fight. It’s a good idea to seek out professional advice, so you can optimize chargeback responses to the payment companies.
In Conclusion…
They say it takes a decade to build up a positive brand reputation and only 5 minutes to destroy it. If you want to prevent a loss in consumer trust and improve the customer experience, do what you can to prevent chargebacks. Your reputation, customers, and wallet will thank you.