Avoid This Common Mistake When Creating Your Money-Back Guarantee

The best guarantees are:

  • fair
  • generous
  • long-term
  • unconditional

When any of these four elements is missing, sales are likely to suffer as a result.

Making the guarantee generous, long-term, and unconditional isn't tricky. Those elements are generally pretty straightforward – almost mechanical to write. But sometimes wording the guarantee in a way that makes it 100% fair to the customer can get a little tricky.

For example, many of my clients are newsletter and magazine publishers. And a number of these publishers offer lifetime guarantees. They permit their subscribers to cancel at any time and receive a prorated refund on "unmailed issues." But if you offer both a "bill-me" option and a payment-with-order option (which is, of course, more desirable from the publisher's point of view), a lifetime guarantee like this actually gives the customer an incentive NOT to pay up front.

Think about it.

Say the customer checks the "bill-me" option for a monthly magazine, gets his first issue, and then writes "cancel" on his invoice.

The publisher doesn't send him a bill for one issue and doesn't ask that the magazine be returned. So the customer gets a free issue.

But if the customer pays in advance and then cancels after the first issue, he gets a refund for 11/12 of the subscription price (for the 11 unmailed issues) and therefore ends up paying for the issue received.

Why should the "bill-me" customer get a free issue when the payment-with-order customer doesn't? It not only isn't fair, it also doesn't make sense from a marketing point of view, since it is bound to limit the number of paid orders the publisher receives.

Solution: Remember when we talked about giving your client advice that profits him (in TGT Issue #77)? Explain that he may be limiting the number of paid orders he receives and unwittingly "punishing" his payment-with-order customers. Instead, suggest that you offer the payment-with-order customers a full money-back guarantee within the first 30 days and a prorated refund thereafter.

Here's another example of an unfair guarantee that could discourage people from ordering: One that says you will get your money back "if you return the product in salable condition."

Why isn't that fair? Well, because the customer doesn't have any control over the way UPS handles the box. And the guarantee implies that if the product is damaged in transit on its way from the customer to your client, the buyer doesn't get a refund. That would make me – and many other people – hesitate to order from you.

Solution: Simply say you will get your money back "when you return the product." If your client insists on including the stipulation that the product must be in salable condition, you could, depending on your relationship with him, gently explain the above. If he still wants it in, by all means, put it in!

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Published: August 4, 2003

1 Response to “Avoid This Common Mistake When Creating Your Money-Back Guarantee”

  1. Bob I understand what you're saying but, when someone get's a wee bit angry about not getting a free copy or he has paid for it instead of . . . This is still greed. He has no real right to complain about the freebie. The publisher is still held responsible for what goes on in his name. Maybe he or she should fire a few people to get his business back on track. Now, I realize I may not be writing what you wanted me to write, but it's too late in the evening, or I should say the early hours of the morning. Besides Bob, if someone attempts to order something, say, from a magazine, it usually tells them what the deal is when returning. Iain II

    Iain ll

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