Why stand behind all your sales with a zero-risk promise or money-back guarantee?
There are a few answers to that question, but the most important one is this: Zero-risk promises and money-back guarantees build trust.
Trust is the single most important element required for building a long-term relationship with a customer or client. Trust is also one of the hardest qualities to build. People are used to being scammed. We read about it in the news every day. And if you are doing business on the Internet, this is doubly true. Hucksters, fraudsters, and hackers are coming out of the virtual woodwork.
Let me also interject here that everyone I talk to about this testifies that 100-percent money back guarantees have been crucial to their success. You should see a zero-risk promise as a huge wrecking ball smashing through the wall that separates you and your prospects.
Beating your competitors
Offering satisfaction guarantees also helps you set your brand above your competitors. See what kind of guarantee your competitors offer, if any, and see how they communicate it. Once you know this, offer a better guarantee and do a better job promoting it in your business.
You’ll probably find that you have no more unsatisfied customers when you go “zero risk.” In fact, you’ll probably find that, as a percentage, you have fewer. You see, these kinds of guarantees act as a vaccine against dissatisfaction. You’ve put the cure in place before the disease has had time to take root!
It’s possible that you’ll even save money. If much of your business is conducted via charge cards, you know that a customer can challenge a charge and easily get the credit card company to issue a charge back. These cost merchants an extra fee. This fee can be eliminated when you smoothly handle the transaction because you are communicating directly with the consumer.
For most merchants and products, parameters need to be set up and clearly communicated, such as a time limit. It’s good to be a little lenient when enforcing this, but setting a one or two week time limit is usually a good idea.
Discover dissatisfaction causes
I heard about one small business owner who added another simple requirement to his money-back guarantee: customers had to tell him why they were dissatisfied to receive their refund. This is a great idea because not only does it help keep buyers honest, it gives the small business owner the kind of feedback that’s required to improve the product or service; this is invaluable information!
Finally, make sure you thoroughly communicate your no-risk guarantee. If you do business in a brick-and-mortar location, post it around your shop and be sure that your sales associates always tell customers about it. If you do business on the Internet, post it on all of your pages. Use an easily identifiable “100% Satisfaction Guarantee” icon that helps imprint the message into your shopper’s consciousness. Be sure it’s on every page that shoppers have to navigate through in order to make a purchase.
Is your guarantee working?
Finally, if you’re worried about customers taking advantage of your generosity, here’s how you need to analyze the situation:
- Find out what your conversion rate is now.
- Find out what your customer acquisition cost is now.
- Find out what your cost of chargebacks and returns is now.
- Implement a solid money-back guarantee program.
- See if it makes your conversion rate improve, if not drop it.
- If your conversion rate goes up, re-examine your customer acquisition cost, adding in the cost of ADDITIONAL returns (if any) and see if your new policy is paying for itself. (Remember: Your incremental customer acquisition cost is always going to go up after you have harvested all the low-hanging fruit anyway.)
After you go through the above exercise, you’ll be able to determine if a zero-risk or 100% money back satisfaction guarantee is right for your small business model.