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4 Things You Need to Know About Refunds

June 11th, 2011 by Bob Bly

Many marketers, both large and small ? and I include myself among the latter ? go bonkers when customers return products for refund.

BK, an executive with one of the biggest and most famous direct marketing publishing companies, told me each refund request drives the company?s owner crazy.

?Our books contain great information, incredibly valuable,? the boss says. ?Why should we allow someone to read the book, benefit from all that great content, and then cheat us by sending it back for a refund??

Perhaps you may feel similarly, or you?re asking the same question. If so, let me share with you a few important facts about refunds in your business.

FIRST, a refund doesn?t mean your product is bad or the customer doesn?t like it.

It may mean that, after reviewing your product carefully, they decide your product is not right for them.

Example: a customer returns your $300 DVD set on investing in real estate.

?It actually seems like a great program,? the customer says in his refund request. ?But after watching it, I?ve decided this isn?t a business I want to get into ? it?s just too much work!?

To me, this is a perfectly legitimate ? and reasonable ? position for the customer to take ? don?t you agree?

In this case, offering a refund is not only a legal requirement, but also eminently fair:

Why would you want your customer to be out of pocket $300 for something he can?t use?

SECOND, offering a refund doesn?t cost you money. It makes you money.

Novice marketers fret about offering a money-back guarantee.

?If I do that,? they worry, ?won?t some customers take advantage of me by reading my book, profiting from the information in it, and then sending it back for a refund??

Yes, some will.

But here?s the thing: offering a money-back guarantee reduces buyer reluctance and increases buyer confidence ? resulting in more orders.

In almost every instance, the greater revenues and profits from the increase you get in orders by offering a guarantee is MUCH greater than the small amount of money you lose issuing refunds.

After all, would you buy a product for $30 or $100 or more ? sight unseen ? without a money-back guarantee?

Of course not.

THIRD, longer-term guarantees are better than shorter-term guarantees.

If you are currently offering a 10 or 15-day money-back guarantee, extend it to 30 days.

Already offering a 30-day money-back guarantee? Test a 60 or 90-day money-back guarantee.

The longer guarantee term invariably increases response rates and sales, because it eliminates the concern buyers have with short guarantees ? specifically, that they will forget to open and try the product — and by the time they get around to looking at it, the guarantee will have expired and they?ll be stuck with it.

But amazingly, the longer guarantee actually reduces refund requests, rather than increases them.

Reason: the buyer is in no hurry to evaluate and return the product, because you are allowing him to try it according to a more leisurely schedule.

Result: the buyer soon forgets about the guarantee ? and whether he actually uses the product or not, just keeps it.

FOURTH, generous guarantees sell more product than miserly guarantees.

Ever see a guarantee that says money back if product is returned ?in saleable condition??

The prospect worries that you?ll claim it arrived scratched or broken, and won?t honor your guarantee because it?s damaged and can?t be resold.

Similarly, some sellers of information products offer a money-back guarantee, but only if you offer documented proof that you followed their system and it did not work for you.

But what if I get your system, and something comes up, and I decide I don?t have time to work through it ? are? you telling me I?m stuck with it because I didn?t use it?

The more unconditional your money-back guarantee, the higher your response rates.

Conditional guarantees depress orders.

Here?s one interesting thing to consider?.

A year or so ago, I began selling e-books online.

With a physical book, the guarantee is: if you don?t like it, return the book, and we will refund your money.

But you can?t really return an e-book.

I thought about eliminating the guarantee, but realized this is absurd.

So instead, I stress the fact that they can get a refund without returning the product in my guarantee, rather than downplay it.

My standard e-book guarantee reads:

?If you are not 100% satisfied for any reason ? or for no reason at all ? just let me know within 90 days.

?I?ll refund your $29 payment in full. No questions asked. And you can keep the e-book FREE, with my compliments. That way, you risk nothing.?

Result: my refund rate on e-books is lower than for any other information product I sell, including CDs and hard copy books.

In fact, I get very few refund requests on e-books, though one could say my guarantee openly invites people to take advantage of me.

My conclusion?

Yes, there are a few con artists out there.

But most people ? especially when you are open and fair with them ? are honest, and will be fair with you in return.

So, follow my advice on refunds in your business. Then watch your sales volume ? and profits ? soar.

I guarantee it ? or your money back!


This entry was posted on Saturday, June 11th, 2011 at 9:32 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

39 responses about “4 Things You Need to Know About Refunds”

  1. Ben Settle said:

    I stopped offering guarantees on my high ticket products and sales increased, with none of the refund headaches, and customers who tend to be of a higher quality than usual.

    Cold prospects I do offer guarantees to, though.


  2. Darren said:

    Interesting post. A book I’ve been reading mentions the effectiveness of refunds as well.

    I think the psychology behind this is that since you’re offering a risk-free product first, most customers will like that and reciprocate by buying.

  3. OddGrooves Drum Loops said:

    I couldn’t agree more with your post. My products are all downloadable, and since I started offering a 30-day guarantee my sales have increased by well over 50%. I get VERY few refund requests. At that time our biggest competitor did the exact opposite and revoked their guarantee.

    I’ll definitely consider extending the guarantee to 90 days and see what happens.

    Thanks for a great blog post,

  4. Brian Croner said:

    I have used a 1 Year Guarantee on books and have found almost zero returns. I found that it put my customers at ease about the purchase and they weren’t in any hurry to pour over the material… and thus, forgot about the guarantee. To Bob: Isn’t a 15% or lower return rate still considered profitable for most mail order operations?

  5. Katherine said:

    I’ve bought a number of your products, Bob. I even returned one once, because it wasn’t what I was looking for. But you’ve always been so considerate and generous that I really think before I buy from you now because I don’t want to return anything. I think it’s a little tacky.

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