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Offering A Money Back Guarantee On Products?

Discussion in 'General Entrepreneur Discussion' started by CEOMike, Jul 30, 2018.

  1. CEOMike
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    CEOMike Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    I'm very close to kicking off the new phase of my business, and one I'll talk more about in a Progress/Execution thread a little later on, so my apologies in advance for being a bit vague in explaining exactly what my product is at this time.

    In the industry I'm selling my product in, there are very few competitors that have a money back guarantee do to the fact that once the part is installed, it is in essence used, and can't really be resold, partially due to liability issues.

    Now there are a few competitors that allow returns on un-used items, and they are subject to a re-stocking fee that typically ranges from 15%-25%.

    So the question I'm struggling with a bit is this:

    Are money back guarantees still as great a sales tool as they once were?

    I have other ways of differentiating myself from them just in terms of product, price and free shipping (something nobody else does), so do I match what they are doing in the return policy, or is there an actual monetary/business reason for doing something different?

    Thanks in advance for your input!
     
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  2. GoGetter24
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    GoGetter24 Silver Contributor Speedway Pass

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    Given that it's a physical part, why not? Just make the money-back guarantee subject to returning the part to prevent the free-riders: then essentially it's at no cost beyond your part's inferiority, which you can improve. Surely that'll increase trust and therefore conversion.
     
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  3. MTEE1985
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    MTEE1985 Silver Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    From a consumer standpoint, two identical products I would buy the money back guarantee product every time. Even though I’d be very unlikely to go through the process.

    From a business standpoint I would just run some calculations. What happens if 5% of customers want a refund? 10%?

    Realistically any decent product will not have a higher return rate than 1-2% so if you can grow with a 5-10% rate then I’d say go for it.
     
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  4. DamienDee
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    DamienDee Contributor Read Millionaire Fastlane

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    I think that a money back guarantee is particularly crucial until your company has a reputation that precedes your marketing.

    So long as your product is of a basic good quality, you'll find your returns rate will be super-low. Except in cases of faulty products, I don't think I've ever seen a return rate over 1%, if you were gtting around 5% then you'd know something was seriously wrong with your product, OR the marketing which sets a misleading expectation for your product.

    So your returns could be viewed as a form of crucial feedback on your prodcut and business.
     
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  5. RoadTrip
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    I offer a 30 day money back guarantee on my products. The product costs me around 5 dollars to make. That plus a part of the shipping costs is what I loose when a customer requests their money back.

    However, money back requests are very rare in my business. If I would have to guess I think around 2-3% of the customers request their money back. That's a no brainer in my case since I believe the guarantee makes the sale easier (assumption, never actually tested this).

    Your product may be very expensive and not worth the guarantee though...
     
  6. CEOMike
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    CEOMike Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Thanks for the input so far everyone. I really appreciate it.

    As far as product pricing goes, this will be in the $70-$80 range, if that makes a difference. My cost is about $9.50 on the raw material + Shipping, so let's call it $13 even. The rest is all the work done to the product before it goes out.
     
    Last edited: Jul 31, 2018
  7. MidwestLandlord
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    MidwestLandlord Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    My products are worthless once used.

    I offer a 30-day, no questions asked, money back guarantee.

    No returns, no questions, no approval code, nothing.

    Call, text, email, website message, or Facebook message your request for a refund and it will be done within 1 business day.

    I can say with 100% certainty that policy has gotten me sales. (my sales doubled when I put that prominently on my website)

    I sell B2B though, so not worried about scammers. (not sure I would be worried with B2C either)

    I would lose about $10 on a refund (actual cost) using my average sale amount.
     
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  8. The EL Maven
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    The EL Maven No longer life's passenger Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    I personally believe it's a must. I mean, unless you only take cash.
    Customers can charge back and what not regardless of your policy, and since this is true, you're better off turning this into a FEATURE rather than hoping they don't realize it's essentially a requirement.
     
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  9. Zcott
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    Zcott Contributor

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    If few competitors offer money back guarantee, then surely you offering it would stand out and meet the needs of a customer who wants confidence in what they buy.

    Depending on what it is, if I see something with no money back guarantee I assume the company has a high return rate because their product isn't up to scratch.
     
  10. CEOMike
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    CEOMike Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    In this case it’s because the product that sold for $75-$85 is essentially worthless afterwards, and all the time and work that was put into it was wasted.

    I get what you guys are saying though, and agree that this is something that could help differentiate me from my competitors and not be much of a *monetary* loss in the end due to the fact the return rate on quality products is so low.
     

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