Refund policies: How to do them right

This one should be a no-brainer, but somehow many in the “Internet marketing” world have failed to learn, or actively ignored, this old school direct marketing basic:

Refund policy – You should have one, you should state it clearly, and you should honor it – without pain for your customers.

The gold standard

Zappos.com gets this right. They have a 365 day return policy – for shoes.

Think about it. Shoes.

What looks good on the screen (or in the store) may not look so good when you get them home. Problems with fit are not always immediately obvious in the store either.

Yet 99.9% of all retail shoe outlets will put you through hell if you try to return a pair of shoes.

Zappos makes it easy. They even provide the return postage. All they ask is that you return the original box and that the shoes be in the original condition you received them and unworn. Reasonable. Doable.

Result: I and many. many people are ordering shoes from Zappos and leaving our less-than-friendly local shoe outlets to gather dust – and that’s the way it should be. I’m all for buying local, but being “local” isn’t an excuse for bad service.

Reality check

The purpose of business is to gather a following of customers who know and trust you, like doing business with you and come back for more.

I realize that for many Internet ‘gurus’ this sounds like “crazy talk.”

For them, the purpose of business is to “launch” a product with maximum hype and heat, abandon the buyers as soon as the campaign is over, and laugh all the way to the bank. This is what they do and this is what they advise others to do.

If you’re a “newbie” to all this, here’s a clue: In spite of all the “social proof” that the people who do this are rock stars and leaders to be emulated, they are fundamentally wrong.

Returns and refunds are an important part of your business. They’re woven right into the selling and marketing process.

If prospects know they will be taken care of if they’re not happy, what do you think that does to their natural reluctance to take a chance on you? You can answer that question in 2 seconds by asking how you’d feel.

How do you feel when a company honors its refund policy – and makes it easy – and how do you feel when it doesn’t? By what twisted stretch of the imagination can a business owner possibly do well in the long run by being a jerk about returns and refunds?

How to do it right

First, have a policy. It may not be as massively flexible as Zappos.com , but it’s good to at least look at them when you’re planning your own.

Second, state your policy clearly not only in your sales material, but also in your product shipment. I know this sounds crazy to the “hit and run” crowd, but this is how the real pros in direct marketing handle their business.

Pros don’t want unhappy customers. If the customer is not happy, they WANT the product back so they can issue a prompt refund.

Third, honor the policy – and be flexible on the side of the customer.

Here’s an example of how we do it: Order form for a home study course

“Perishable” items

There are certain items like airplane seats, hotel rooms, doctor visits, and seminar seats that are perishable.

For example, if you’ve booked a hotel room and then don’t show up, you’ve deprived the hotel the opportunity to sell that room to someone else. They can’t restock it and re-sell it, even at a discount. It’s gone for good, but their overhead bills aren’t.

Thus you’ll find pretty strict refund policies with business that sell time-sensitive services.

For example, when we offered live events in real places (like hotels), our enrollment policy was very clear. Yes, you would get a refund of your tuition if you could not attend, but there would be a stiff non-refundable registration fee.

The policy was crystal clear and right on the registration form, but truth be told in cases of real hardship (and there were many), we returned the registration fee too (or more often gave people who missed the seminar the recordings from it, which the vast majority wanted more than their registration fee.)

When you’re dealing with large numbers of people, there will be illnesses, deaths and other circumstances truly out of the control of your customers.  Why would you want to add to their woes?

For people who made it to the event, we offered what I think is a fair and sane refund policy: If you attended the event and weren’t convinced at the end of the first day that it’s everything you expected – and more – you’d receive a full refund no questions asked and no hard feelings either.

We didn’t need to honor that policy very often, but when we did, it was no big deal.

Haven’t you ever attended a class or program that you discovered was way over your head or more work than you were prepared to do or just not a right fit?

Do you really need that person’s money? What would be the point in keeping it? They’ve traveled in good faith, and usually at significant expense, to try you out. If it’s wrong for them, it’s wrong for them.

Yes, you need to make sales to stay in business, but to thrive in business and have a reasonably good time in the process you have to focus on the happiness of your customers, with special consideration for those brave souls who don’t know you and take a chance on you by buying something from you for the first time.

It’s really not a complicated concept.

Have a refund policy, state it clearly and honor it.  It’s a “no brainer” but apparently there are people with no brains out there.

P.S. There is an unsigned, undated “article” on the Internet on a web site that is registered under a cloaked name and that has no contact info that claims it is hard to get a refund from us. If that “person” will contact our office with the details of the transaction (the name they used when they made the transaction would be a nice place to start!), we’ll be happy to sort it out.

P.P.S. I asked my bookkeeper to run the numbers on refunds we’ve paid out. Over the last five years, we’ve cut $71,891.00 in refund checks for various reasons.

P.P.P.S. If this approach to business makes sense to you, you might enjoy my book “The System Club Letters” that covers these topics and much more.

Click here for: More information about The System Club Letters

– Ken McCarthy

P.S. For over 25 years I’ve been sharing the simple but powerful things that matter in business with my clients.

If you’d like direction for your business that will work today, tomorrow and twenty years from now, visit us at the System Club.

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