I know, I know it’s a scary prospect. “If I offer a money back guarantee won’t everyone take advantage of it?” This is one of the most common questions I’m asked when I speak to business owners about this.
But it’s just not true. Why do you think big business offer them. Let me give you an example. Gerry, my partner bought some yogurt from Asda a couple of weeks ago. When he opened it, it was clearly off. So he poured it down the sink and opened another one that was clearly off too. Thinking he had left it in the car he wasn’t going to return it. But I reminded him he had gone straight to the shops after work and then he came straight back home. We live in Scotland so the short journey time was not a hot one!!
Anyway he took it back and they duly replaced both cartons, even though one was empty. They also gave him a £2 voucher for his trouble. Now that’s not only good customer service but it’s keeping up with their guarantee. For bigger items they have a ‘changed your mind’ guarantee. If you buy an electrical product or mobile you can return it within 30 days if you change your mind. Now think of the number of customers that Asda has compared to you. Would they do this if it didn’t make business sense?
So why do they do this? There’s a couple of good reasons for this, one is called risk reversal and the other is the pony strategy (well that’s what I call it!). Let me explain, in risk reversal you’re taking away the risk of the customer buying something from you. If you don’t offer a guarantee then every time a customer buys from you they are taking a risk – they might not like it when they get home, it may not be to their tastes, they might change their mind, the quality may differ from what they were expecting. They’re then stuck with a purchase they don’t want and they can’t return.
As for the pony strategy this comes from a story I heard many years ago. A horse breeder was selling ponies but was finding it difficult to sell any until she hit upon a strategy. Take the pony home for 30 days and if it’s not right for you then you can return it. Once she let her potential customers know about this she soon sold her ponies! Why? Can you imagine taking a beloved pony away from a child after 30 days? Once you have something and you’ve got used to it, it’s much more difficult to give it up.
Your guarantee doesn’t have to be a money back guarantee, although that’s one of the strongest ones you can do. Pick one that’s appropriate to your customer base and their expectations and you might need to test them. But once you hit on the right one watch your sales go up.