Software Business

The 'We're Not Happy' 'Til You're Not Happy' strategy

Money back guarantee is a popular topic nowadays especially for software vendors. How is it more convenient? Is it always suitable for the vendor to offer money back guarantee? We try to answer these questions in this article.

Money back guarantee, judging from its name is a simple guarantee stating that if a buyer is not satisfied with a product or service, a refund will be made to him. This is a very good strategy in order to gain the confidence of the customers. But the case of software is a bit troublesome since most of the time the payment is made with a credit card on the internet and consequently the acquisition can be refunded. In other words, the credit card actually gives the customers a money back guarantee. So in this respect, we might talk only of a marketing strategy.

Before you set up your mind on the kind of guarantee to offer, take into consideration each item sold. If you make a general guarantee, this should apply to each item sold on your site and if not, different stipulations should be made since different product will require different conditions. Also, it is strongly advisable that you look at your competitors’ sites and at the ‘promises’ they make. You could make up a better guarantee or you could just market it better so as to appear as an advantage for the one purchasing the product.

The most important benefits of the money back guarantee are:

• Trust and credibility
  Having a money back guarantee policy is very useful in two ways, since it builds trust on both sides: the vendor and the customer. The vendor will show that he trusts the product he sells and that he cares a lot for his reputation and consequently, for the customers. The customer on the other hand will feel more entitled to make an acquisition;


• Testing software at full capacity
  The customer besides trust also has the opportunity of testing the product himself. After a certain period of time, depending on the software vendor policy, he will be able to reject the product purchased on the grounds of his dissatisfaction with the overall quality of the product. Of course that period of time is rather limited (usually no more than 30 days); otherwise, everybody would eventually decide to ask for a refund, not necessarily because of the poor quality but because in the end that certain program might become useless.

The most polemical issue regarding the money back guarantee is whether it increases sales or not. After all, why would you implement such a feature in your marketing strategy? The answer is as uncertain as the question. Some pretend to have noticed a slight increase in sales; others say there is no such thing.

Indeed we could go as far as to assert that the age we currently live in is one where competition is fiercer and fiercer; the winning person in this competition is obviously the customer who decides in the end on the vendor judging by some characteristics such as prices, vendor reputation, the money back guarantee, and so on. From this point of view, when deciding between two software products, the money back guarantee might give a helpful hand to make a faster decision (not necessarily better).

At the same time, there are different types of guarantees that you can offer; along money back, there is also satisfaction guarantee, price-protection guarantee, one-time guarantee, etc. You might take a look at what each of them means in this article called Should you offer a Money-Back Guarantee?

Ups and Downs

Upsides of Money Back Guarantee

• Money Back Guarantee eases the buying decision of the client by giving him a kind of psychological security that his money will be returned; the software vendor is the one assuming the risk in the transaction.
• Money Back Guarantee gives the client no reason not to buy a product.
• Money Back Guarantee gives legitimacy: it ‘defeats’ to some extent the risks of ‘anonymity’ on the internet.

Downsides of Money Back Guarantee

• Abuse: clients might just want to try the full version of the software you are developing and immediately afterwards, request a refund.

How to advertise the money back guarantee?

The money back guarantee can be interpreted as an additional 'treatment' of the software vendor, not a feature contributing to the overall quality of the product. Nevertheless, it should be properly advertised. Some software vendors ask themselves how they can do that; a simple answer: a specific phrase in the product description or just "x-day money back guarantee" in red on the buying page. Also, be aware that the process is simple enough; the client is probably already mad with the quality of the purchased product so do not make him even angrier.

How many refunds to give?

Well, there is no specific answer to this question either. This certainly depends entirely on you. You might make the entire money back guarantee procedure more difficult (meaning more formal enquiries to the customer in order to find out the exact reason for his money back request and give the money back only under certain circumstances) or you could make it easier - just give the money back at request without much research. In other words, you should be careful since the end user sometimes has other intentions besides the purchase: for instance he just may try to 'evaluate' the fully featured version of the product and to see whether the product is any good.

Is there any time limit in money back guarantee?

Obviously, as already mentioned, there should be a limited time for offering money back guarantee. Otherwise you might find yourself in the situation where everybody might ask for money back guarantee since new better software products might appear replacing practically the current program that they own.

Most software vendors offer money back guarantee for a 30 day period. Your can see here the resemblance with the software trial periods both in terms of time limitations and in the availability of software features. The difference actually represents the actual financial transaction that took place in the case of money back guarantees purchases. Also in the case of money back guarantee software programs, all the features of the product can be tested in contrast with trial versions which, depending on the typology of the software, may include additional limitation (i.e. trial software versions can have disabled functionalities, can be time or usage limited or can comprise more limitations at the same time).

Some say that there is a difference in attitude as far as the money back guarantee is concerned: those purchasing a software product with a backup CD are less likely to resort to the money back guarantee than those downloading the software over the internet. In other words, tangibility influences the attitude towards the money back guarantee. This is just a speculative hypothesis, worth verifying though.

How to treat usability issues with software products?

Be careful with the ease of use of your product if you are a software developer trying to offer the money back guarantee in the attempt to gain more prospects. You might have a lot of money back guarantee calls just because the end users are not capable of fully using the product. Therefore much time (and nerves :)) might be spent on the phone while trying to help the clients to detect certain features that they want to access. The problem would be more easily solved but for the 'nevrotic' customers.

Should the shipping and setup fees be refunded?

By and large, in the case of software there shouldn’t be the case – most of the time it is simply downloaded and activated. The situation is worth mentioning in the case of backup CDs. With reference to this aspect, many companies choose not to refund shipping and setup charges since they already did that when delivering the product. Nevertheless it would be a good idea in case of a defective product to provide a total refund; in addition, you should be prepared to tackle different problems and different money back guarantee requests scenarios.

Conclusion

The money back guarantee most of the time sounds quite promising for the customers. In spite of that, this might turn out quite problematic if you are not sure of your product or if you have usability problems with your software. In this respect, the money back guarantee might bring you more trouble than benefits. When making refunds, make sure you gather as much information as you can about the problems that the clients encountered with your product in order to make proper improvements.

For further reading, I recommend Tips on creating a money-back guarantee for your site, a short but relevant article featuring more tips. What is certain is the fact that the money back guarantee will get rid of that moment of hesitation that the customer has before making a purchase. So, if your trust your product, go with the money back guarantee.

This article was published in the September 2008 issue of ASPects, the monthly newsletter for Association of Shareware Professionals members.

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