For many device companies, a significant percentage of all product or part returns end up in the category “No Trouble Found” or NTF, also known as “No Fault Found” or NFF. This is the label received by a product that fails (or appears to fail) after being returned to the OEM for testing, only to find there’s nothing wrong with it. If the device is returned to inventory, by law, it can no longer be sold as a new product.
Depending on the agreement between the manufacturer and the retailer/distributor, sometimes penalties or charges are levied against the reseller for NTFs that are returned to the OEM. The product must be labeled as NTF with a corresponding lowering of the price. The combined cost of technical support, retail sales handling, returns processing, logistics, depot, lab testing, and other administrative resources that support the return process functions as well as the inventory reclassification add up. Companies lose profit margins on these NTF devices and are forced to take a loss.
NTF afflicts every sector. FutureDial clients process returned or damaged devices and we have found that within the consumer electronics sector, 68% are classified as NTF. This breaks down to 30-40% of smartphones, and 30% of smart tablets are all categorized as “No Trouble Found”, but only 4-5% of these product “malfunctions” are actually being caused by hardware issues. This means that this very high percentage of device issues are predominantly fixable if the correct source is identified, but otherwise they’re costing a large amount of profit loss.
Paying the Price
A report from Accenture estimated that U.S. consumer electronics manufacturers, communication carriers and retailers spent an estimated $16.7 billion in 2011 to receive, assess, repair, re-box, restock and resell returned merchandise. Accenture also surmises manufacturers spend 5-6% of their revenue to manage customer returns while retailer returns represent approximately 2-3% of sales. Numbers such as these could mean the difference between profitability and loss for a product, and could materially impact market share as well.
With the cost of returns already so high, the prospect of successfully reducing NTF returns becomes particularly attractive. This can reduce costs while preventing negative customer experiences and associated damage to an OEM’s brand.
Accenture also found that, of all returns, a staggering 68% are labeled as no trouble found (NTF). Another 27% are associated with buyer’s remorse, remorse that can occur for reasons similar to NTF, such as sub-par customer education or improper expectation setting at the time of the sale. This also includes a sampling of customers that we’ve seen, who are trying to game the system to gain an upgrade or replacement because their device exceeded the retailer’s return policy window resulting in a made up a story about unseen/unsolvable product issues. When adding these figures together, 95% of consumer electronics product returns are initially attributed to something other than actual product defects.
It’s important for retailers to have a proper testing function in place to aid in return and deflection of NTF. Additionally, retailers should invest in software that collects agnostic device data (app logs, crash logs, event logs) that are sent to a central server in the cloud to run statistical analysis on all the data looking for patterns and potential problems (software contention, resource conflicts, incompatibilities) through an AI engine.
Many times a customer will bring a phone in to a store after experiencing abnormal behaviors or issues on the device, only to have the store rep “reset” the device and restore the firmware. After the customer begins to reinstall their original apps and services, the problem reappears and the customer decides the problem was not fixed and brings the phone back in for repair, creating an unproductive and costly cycle.
By adding intelligence to device issue resolution, companies can preemptively deflect the return of NTF smartphones and tablets through analysis of data at the first point of contact at the retailer. These companies need to address the needs of device troubleshooting involved with NTF. This includes alert/notification management and resolution generation that ultimately reduce returns and churn. Addressing these factors will help to increase customer satisfaction and retention while lowering the profit and reputation loss associated with NTF.