The Chinese symbol for the word ‘crisis’ also contains the symbol for ‘opportunity.’ We love this way of thinking, especially this time of year.
Because it’s chargeback season. Millions of merchants are gearing to fight chargebacks.
The vast majority of holiday chargebacks take place in the first weeks of the new year. We know this because we’ve provided merchant accounts to e-commerce businesses since 2001. So right about now, unfortunate merchants are starting to feel the brunt of the 2016 holiday shopping season in the form of chargebacks.
We’ve written extensively on chargeback prevention and mitigation, and even reversal. We believe wholeheartedly that step one in disputing a chargeback is direct contact.
One Merchant’s Simple Way to Fight Chargebacks: Contact
We know an online merchant who ships lobster and seafood dinners – live and frozen – overnight in the continental U.S. It’s been his livelihood for 17 years. He’s a one-man shop and he’s done extremely well (he was even approached recently by a larger company about selling his business).
His chargeback rate? Next to zero, which is impressive considering the potential for such:
- The shipping of food is a risky business – sometimes it doesn’t arrive the way it should (that’s also happened)
- Sometimes shipping is delayed due to foul weather in a particular region (happens every year)
- And sometimes a customer just isn’t satisfied with an online seafood order (it happens, but hardly ever)
The way he handles his chargebacks, however, is so genius yet so simple: He contacts the customer by phone and offers a full return, some free frozen chowder and 10 percent of his/her next order if the customer reverses the chargeback.
What Happens When Merchants Contact Customers?
Maybe we should rephrase that question: What’s the worst that could happen? They hang up? They refuse to discuss the issue?
Merchants seeking a solution as to how to fight chargebacks should follow the tactics of our lobster friend: Approach their customer and simply ask why they were dissatisfied with their product or service, and offer them something; perhaps free shipping and/or 15-20 percent off their next purchase.
And if the call goes well, merchants should consider asking what they’re really looking for: Whether the customer would contact their credit card issuer to reverse the chargeback.
It’s also an opportunity to educate the consumer why a refund is always the better solution than a chargeback. Too many chargebacks can drive a business under water. We’re not saying that refunds help a business, but it is a far better, safer option than chargebacks.
Back to our seafood merchant…
He’ll call his customers direct, strike up a conversation, and ask them what he can do to right the situation. He’ll offer them 20 percent off their next order, free shipping, and even free frozen chowder for four. This has resulted in many repeat customers, with which he has built relationships.
It’s More Important Than Ever to Fight Chargebacks
Because of recent changes by Visa regarding chargeback monitoring and fraud prevention, merchants are strongly advised to keep chargebacks to a minimum, or risk losing their merchant account. As of Jan. 1, 2016, merchants whose chargeback rates exceed 1 percent of sales or 100 per month may face a probationary period with the major card brands until the merchant can show consistency in keeping chargeback levels below the threshold.
Though it is easier for some industries than others, merchants shouldn’t think of fighting chargebacks in terms of time and effort away from operating a business, but rather the recovery of lost revenue. For more information, merchants and partners can reach out to our merchant account managers at 1-800-530-2444, or consult our free online guide on how to fight chargebacks.