Over the last 12 months, I’ve continued to shift some of my own online business activities to producing products to sell on my blogs (I wrote about some the process here).
This has been a profitable move for me, but has also been one that has meant making a fairly significant mind shift in the way that I operate. In fact, it’s probably more accurate to describe it as a series of smaller mind shifts.
I’m not alone—in talking to many bloggers who are making a similar transition, I’m seeing a number of questions come up again and again that indicate to me that we’re all having to jump over the same hurdles.
One of those hurdles is money-back guarantees.
I spoke with a blogger just yesterday about this—they shot me an email asking whether they should offer a guarantee on their ebook’s sales page. Their concern was that in offering a virtual product which could not be physically returned people would take advantage of the guarantee: they’d pay for the product, download it, and then ask for a refund to get what would end up being a free ebook.
I remember wondering the same thing when when I created my own sales pages for the first time. Is offering a money-back guarantee on a virtual product simply setting yourself up to be ripped off?
Answering the question of money-back guarantees
Lets start out by saying that you will certainly find that a very small percentage of people will probably take advantage of this refund to get a free product. I’ve been selling ebooks for a couple of years now and in the times I’ve been asked for refunds I’ve certainly suspected a handful of people doing this—but it’s a very very small minority.
Here’s what I’ve seen when it comes to refunds on my own ebooks. In the last two and a half years, I’ve sold around 40,000 ebooks here on ProBlogger and on Digital Photography School. I don’t have an exact figure on how many refunds have been requested and given (we refund 100% with no questions asked), but I would estimate that the number is less than 100—at the most it’d be 150.
The majority of those refunds have been requested for genuine reasons:
- from readers who thought they were buying a real book, not a downloadable file
- from readers who felt that the ebooks were too advanced or too easy for them
- from readers with download problems (e.g. those on dialup)
- from readers who accidentally brought two books.
You can tell that many of the requests are genuine from the way that the customers approach the refund; you can see for yourself that others are genuine (in that, for example, they didn’t attempt to download the product). Either way, refunded sales make up around a quarter of 1% of my total sales. They’re not very significant.
Also keep in mind that even if someone does request a refund with the intent of getting a free ebook, it doesn’t actually cost you anything more than a moment for you to process a refund. That’s a sale you’d never have had anyway, and if the person actually does read the ebook, they may just become a fan if what you’ve written is worthwhile.
On the flip-side I think offering a money-back guarantee comes with some pluses.
1. A money-back guarantee removes a barrier to purchase
I know for a fact that at least a proportion of my readers buy my ebooks because they know that if they don’t like them, they can get their money back. I regularly receive emails, see tweets, and get comments on posts from readers explicitly saying that they liked the idea of being able to taste and see before being committed to the purchase.
2. A money-back guarantee can help build trust
The web is a place where people are rightly suspicious. Having a money-back guarantee doesn’t automatically make people trust you, but it can help to build trust. Your guarantee is an indication to people that you’re not just after their money, but are interested in providing them with value.
Also, by issuing money back guarantees quickly and without any strings attached, you’re building a relationship with those who do seek them. Of the 100 or so refunds that I’ve given over the last couple of years, I often get emails back from people who are impressed with how easy it was, showing relief that I’m trustworthy, and at times indicating that they’re going to buy another product of mine that’s more appropriate to their needs.
I’ve also had quite angry and unsatisfied customers who emailed with dissatisfaction turned around when I offered to refund their money. I often communicate to readers who complain that I’d rather them be satisfied and happy with my company and not have their money, than have them unhappy and have their $20. I’ve also seen people publicly tweet or leave comments about how my sites are trustworthy because we issued refunds.
Refunds are an opportunity to build trust and goodwill with customers and readers.
3. Money-back guarantees differentiate you from the competition
Not everyone offers a guarantee (at least, not everyone promotes that they do). This provides an opportunity for you to differentiate yourself from the competition.
This was illustrated by an email that I received from a reader of dPS recently who told me that they’d bought our new ebook instead of a real, hard-cover book from Amazon because they saw our refund policy and didn’t feel that they’d be able to return a real book to Amazon.
If a person has the choice of two products (virtual or real) and one will give the buyer a refund if they’re not satisfied, it could just be that guarantee that gets that customer over the line.
4. Money-back guarantees drive you to produce value
One of the side-effects of offering a money-back guarantee is that it keeps you accountable to your readers and customers. I remember having this conversation with an author who was in the process of writing an ebook several months ago…
Author: I’m worried about offering a money back guarantee. Won’t that lead to lost sales?
Me: It could, but most people only ask for it if they’re genuinely unhappy with the product.
Author: I guess that means I better make it good!
While I’m sure the author would have done a good job one way or another, he expressed to me six months later, after the ebook was launched, that our short exchange had motivated him to put extra effort into developing his ebook. The threat of lost sales made him more accountable to his potential customers.
Why guarantees are worth it
Summing up, I offer money back guarantees of my info products because:
- they don’t cost me anything
- they do lead to higher sales
- they do help me build trust and relationships with readers
- I think it’s a good business and ethical way to be
- they keep me accountable to deliver value to those who buy them.
Ultimately, I want those I interact with online to get value and I’d rather not have their money if they don’t feel that value is delivered.
P.S. There’s another factor to consider: if you’re using PayPal, you’re pretty much forced into giving refunds at times. Buyers can issue a dispute with PayPal within 60 days of a purchase and, in most cases, a refund is granted. I spoke with one ebook seller recently (who’s a lot bigger than me) who said that they couldn’t remember a time when PayPal had sided with them in disputes, and refunds were almost always forced on them by PayPal.