Money Back Guarantees – Good or Bad?

by Ed Martin on November 29, 2009

Money back guarantees are a sure way for a small business to boost sales. They show you stand behind your product or service. Customers feel less risk in making a purchase and so will pull the trigger. What’s not to love?

Unconditional guarantee
If you sell a product, the best thing you can do is to offer an unconditional guarantee. No tricks and no questions. Customers love it and you can build up customer loyalty. You can do the same thing when you sell a service. Here you offer satisfaction guaranteed.

And an extra benefit to you is that you get fast feedback if you’ve got a problem with your products or service because the refund requests will start to come in right away.

And now the downside
Of course there are some downsides to giving guarantees. It can cost you a lot of money if there are big problems with your products so test them well.

Guarantees for services invite some customer abuse. What does satisfaction mean? How many times can a customer ask you to redo something? When do customers start to cross the line?

Online sales are special
If you sell information online, you have some special concerns. How do you handle people who buy your ebook, download it and then request a refund? Clickbank requires a 60 day refund policy for sellers, but they also keep track of people with excessive refund requests.

I have come across a number of sites that sell programs and information with no refunds honored. You can do this if you have a good reputation, plenty of verifiable testimonials and of course a quality product.

Membership sites are more special
Membership sites have their own policies. Many have no refunds. Instead they let members cancel with no questions asked. The usual practice is that if you pay for a month, you get a month. No partial refunds.

Many sites do offer a trial period at a reduced cost to let new members see what they are getting. Here, too, you run the risk of someone signing up for a short time, taking everything off the site and quitting, but then they will not be getting any of the ongoing benefits of the membership.

When you sell bits and bytes there are always going to be some people who will try to take advantage of you. Your best defense is to give buyers quality products so that they are happy with their purchase. That way everybody wins.

For another idea about making customers happy, take a look at my post on keeping customers loyal.

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You can always contact me at MicroBizMadeSimple.

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