Question: LL Bean had a return policy that allowed customers to return items regardless of the date of purchase or condition of the item. This policy

LL Bean had a return policy that allowed customers to return items regardless of the date of purchase or condition of the item. This policy led to a loss of up to 30% of the company's annual profits. Then in February 2018, LL Bean changed its policy to one year from the date of purchase. Several class action lawsuits resulted, although some of the cases have since been dismissed. Researchers Abbey, Ketzenberg, and Metters at the Mays Business School at Texas A&M University proposed a method to detect customers who are most likely to abuse return policies. In using this method, retailers could effectively "pick" the customers they wish to do business with and minimize their exposure to certain sets of customers based on a profitability index assigned to each customer. The resulting return policy could then be segmented, with more liberal return policies applied to more profitable customers and more stringent policies applied to those customers whose profitability rating is low or even negative.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!