Where’s My Money?
Strong guarantees and prompt refunds are customer service best business practices that protect both future cash flow and customers and assets. Guarantees and refund policies are not mutually exclusive. Offering a guarantee yet withholding a requested refund is a noxious combination that can leave a bad taste in the mouth of a customer as well as affect future income. Is it a risk worth taking?
Guarantee is a Badge of Honor
Slapping a big “G” on your treasure chest of goodies is a badge of honor to be worn proudly in the name of good customer service.
Guarantees can be made when
- your product is great
- your service is superb
- you have nothing to hide
- your customers are king
No guarantees are necessary when
- the deal is so wonderful nobody will disagree
- the product is so shabby nobody will ever buy it
- the customer’s satisfaction doesn’t really matter
Nein! Nein! Nein!
“All Sales Are Final!”
“Your Refund Policy Sucks!”
Twice I’ve asked for a refund and the request was denied. In these two cases both were virtual products — server-side software used to run some type of online activity. Moreover,
- one product didn’t perform as anticipated, and
- the other product didn’t perform as advertised.
In both instances, I deserved a refund. In the latter, I escalated the issue to the payment processing service and my credit card company.
Another commonality in both cases taught me a lesson I won’t ignore going forth. The products were provided by single developers who are not backed by big teams. What I suspect is they were cash-strapped and didn’t have access to resources the way a larger company would. That is understandable, but not excusable.
I emphatically support micro-business so this doesn’t mean I won’t continue to buy from them; however, I would point out to any budding small business or micro-business owner reading this that strong guarantees and liberal refund policies are all the more important to the long-term health of your business.
Customer Service Saves Customers
Now I’ve been on both sides of the fence as a small business owner and a customer. I take customer satisfaction serious, mine AND my customers.
Over the course of an internet lifetime, I’ve asked for (and received) refunds and I’ve given more than one customer a refund. Once, a customer of my webhosting service asked for a refund because it took me too long to set up his account. The service was new and only partially automated. That bit of manual labor cost me a long-term customer and a portion of what would have been recurring income.1 You can bet I didn’t make that mistake again! (Automation is an equalizer, but we’ll save that wisdom for another article.)
Customer satisfaction is not to be trifled with.
Giving a customer a refund does not mean you lose a customer — it means you’ve satisfied that particular request.
Have you ever purchased a product at a store, was less than happy with it (or just had buyer’s remorse) and returned it to the store for a no-hassle refund? Did you ever visit that store again (and keep whatever you purchased)? Of course!
It happens all the time. So much so that some mega stores will give you a refund even if it is past the refund redemption period. They might not give you any cash back or return the money to your credit card, but rather than risk losing you as a long-term customer, they’ll give you a gift card with in-store credit.
Of course, sometimes you (or the mega store) might lose a customer if the person is a habitual freebie seeker. This is probably more the exception rather than the rule. While we don’t want to be the one mistaken for a freebie seeker, that isn’t enough disincentive to stop us from requesting a refund nor from receiving it when we ask.
Customer satisfaction is just that serious.
Prompt Refunds Protect Our Assets
Here’s what I think. I think that our customers are nice because they’re not worried. They’re not worried because we have a ridiculously liberal return policy: “We don’t want your money if you’re not amazingly happy.” . . . Customers know that they have nothing to fear. . . The no-questions-asked 90-day money back guarantee was one of the best decisions we ever made at Fog Creek. – Joel on Software
I’ve never heard anyone talk about refunds as a cash flow strategy or name them as part of business assets. But from a customer service point of view, prompt refunds protect your ability to maintain cash flow and help your business hold on to your most valuable asset: your customers.
You can tell from his quote above, Joel Spolsky of Joel on Software gets it! Part of his seventh assertion, Greed will get you nowhere2, the quote captures the importance of using refunds as one of the measurements of customer satisfaction. The article is a timeless, priceless, evergreen must-read.
Microenterprises cannot afford to overlook this facet of customer service any more than larger small businesses or huge companies can.
Credibilty, Higher Conversions, and Risk Aversion?
The Editor at CompassDesigns.net mentions a few scholarly studies3 that point up the need for a refund policy and make a strong case for that refund policy being liberal as opposed to stingy. Factoring in SEO and sales conversions, he rightfully links refunds (or lack thereof) to higher conversions and customers’ natural tendency to spot risks and run the other way.
Earlier I said we didn’t want to be falsely labeled as freebie seekers just because we’ve asked for a refund. But business writer Anna Johnson says that even if a “freebie seeker” requests a refund, you should ante up because it’s your credibility on the line, not their’s.4
Let’s Not Go There
A final note: Online payment processors and credit card companies work hard to protect both sellers and buyers.
As a consumer of products and services online (and off), their hard work benefits you and me. Though sometimes these processors and their processes seem overly zealous, they can work in our favor. As a seller, payment processors protect us from fraudsters and scam artists. As a buyer, they are our final line of defense when a seller won’t issue a refund that has been requested.
When the process works well, we are grateful.
Does Your Refund Policy Suck?
What’s your refund policy? Has it ever been contested? Ever given or denied a customer a refund? Have you ever been denied a refund you requested?
Thanks for reading. Share your thoughts below.
Photo Credit: Deny Everything by Eclectic Dyslexic on Flickr
Link to this page:
- My comment on Surprise! A Lesson in Superior Customer Service, 9 July 2011. I often reference Adam Toporek’s IntenseFence blog because of his tight focus on “Customer Service Stories,” in which he relates anecdotals as well as gives excellent insight into the hows and whys of great customer service. This is also a good time for you to read his epic post Understanding Customer Lifetime Value: A Non-Geek’s Guide. [↩ go back]
- Joel Spolsky, Seven steps to remarkable customer service, Joel on Software Blog, 19 February 2007. Accessed 20 February 2012. [↩ go back]
- Editor, CompassDesigns.net, Do You Have A Refund Policy?, 24 May 2008. Accessed 20 February 2012. He references the Stanford University Credibility Study and a MindValley Labs article about risk reversal. [↩ go back]
- Should You Give Freebie Seekers a Refund?, Anna Johnson, Kikabink News, 21 April 2010. Accessed 20 February 2011. [↩ go back]