When online deals go wrong…

D. Murali | Updated on February 09, 2011

Ms Chittu Nagarajan, Head - Community Courts, eBay & PayPal

Taking care of buyers may cost money in the short-term, but will make more money in the long-term. Ms Chittu Nagarajan, Head - Community Courts, eBay & PayPal

Online dispute resolution, or ODR, is about getting customer problems resolved quickly and efficiently, so that the merchant can get back to business and the customer is completely satisfied, says Ms Chittu Nagarajan, Head - Community Courts, eBay & PayPal (, during the course of a recent interaction with Business Line.

Adding that ODR is an important means of building trust in transactions, because buyers will only make purchases if they are confident that any problems that may arise will be addressed immediately, Ms Chittu avers that ODR is an essential component of any successful online business.

Excerpts from the interview:

How can corporates benefit from ODR?

Every company with customers faces the prospect of some transactions going wrong. Maybe the item doesn't arrive on time, or the buyer is unhappy with the product as delivered. Maybe a service doesn't provide the advertised benefit, or the customer doesn't like the attitude of the individual providing it.

A good estimate is that even the best-run companies will experience about one to three per cent of their sales generating some sort of issue or complaint from the customer. The question is how those companies respond once the complaint is reported.

Many companies see customer complaints as an annoyance. They make it difficult for their buyers to report issues, and once they are reported, they drag their feet in addressing the buyer's complaint. In fact, research has demonstrated that customer complaints are a major opportunity to build customer loyalty.

Consulting firms in the US have determined that customers are more loyal to businesses that resolve their problems quickly than to businesses that never generate a problem in the first place. Think of your own purchases: when no problem arises, you almost forget where you purchased the item, but if a problem arises, you have a much more in-depth interaction with the merchant in question – and you're left with a lasting impression of the seller, either positive or negative.

Any company that wants to build a loyal customer base and continue to grow must have a well thought out system for handling all kinds of customer complaints. ODR is also a helpful tool to identify the mischievous customer. The field of ODR has developed a suite of best practices that can guide businesses on exactly how to design such a system.

Can you tell us about the economics of ODR?

Rather than throwing some numbers which might be very specific to each company and industry, given the nature and size, I would like you think of the following factors which will have an impact on every type of company – time, cost, process, resources. The cost against each of these factors can be reduced by 50 to 70 per cent by incorporating ODR in a company's strategy.

What has been the experience of e-commerce players?

International e-commerce brands like eBay, PayPal, and Amazon have invested heavily in their redress processes because they know the importance of trustworthy resolutions. Many quickly-growing new businesses, such as, have built their reputation on quick and easy customer resolutions.

Taking care of buyers may cost money in the short-term (for instance, customer service agents and refunds) but will make more money in the long-term, as buyers return again and again to make future purchases. Savvy businesses know that paying the upfront costs is a smart investment over the long term.

At eBay and PayPal we resolve more than 60 million disputes a year in sixteen different languages. Our companies only have about fifteen thousand employees around the world, so there's no way we could manually work all of those cases; instead, we've written software programs using the principles of ODR to help get those disputes resolved. We've learned a great deal about what buyers want from their resolution processes and how to minimise frustration and maximise loyalty.

Is ODR getting adopted outside of e-commerce, too?

Over the past ten years many international institutions and non-governmental organisations have called for the expansion of ODR services to preserve online trust. ODR is not the only tool necessary to create trust in transactions, but without it, online trust becomes difficult to sustain.

Both business and consumer advocates have embraced ODR and called for more widespread availability of ODR services around the world. Consumers want to know that their problems will be addressed quickly and fairly. Businesses want to get problems resolved quickly so they can retain their customers and get back to making more sales.

A few years ago, the Global Business Dialogue on e-Commerce (a global business group), and Consumers International (a global consumer advocacy organisation) issued a joint statement calling for more high-quality ODR. This was a major breakthrough, considering these organisations often see issues in diametrically opposite ways.

And now we have UNCITRAL (the United Nations Commission on International Trade Law) proposing a global online dispute resolution system for all cross-border consumer disputes.

What is the ODR process?

Most ODR systems begin with non-binding resolution processes (e.g. problem diagnosis, advice, direct negotiation), proceed to the facilitated mediation process and escalate to more binding processes (e.g. arbitration, expert evaluation) if necessary. The majority of issues can be resolved in the early phases, because many issues are due to miscommunication or misunderstandings.

Apart from these, many software tools and technology aid in prevention of disputes, as a communication channel, to help in computing certain logic, for archiving, retrieving and mapping data.

Published on February 09, 2011

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