21 Şubat 2008 Perşembe


What kind of guarantee do you offer on the products and/or services you sell?

Many businesses have fairly restrictive refund policies and limited to no guarantees. A very sensible approach. After all, who wants to be saddled with returns caused by everything ranging from defects to wishy-washy customers? The paperwork alone is a nightmare let alone trying to wrangle credits from vendors because the whole commercial engine is geared towards driving products to consumers, not away from them. Increase your guarantee and your returns will skyrocket along with the numerous headaches they bring.

This logic is perfectly sound.

Paradoxically, however, the reverse is true: The more liberal the guarantee, the fewer returns come in. Yes, you read that correctly: Increase your guarantee and your rate of returns will decrease. Pretend you walk into Store A and see an item with a 30-day guarantee. Store B carries the exact same item and offers a 1-year guarantee. Store C offers a lifetime guarantee: If the thing ever breaks or becomes otherwise unusable, bring it back for replacement or refund.

Assuming all else is equal about the product, which store would you purchase from? I for one would be very surprised if you said anything but Store C. But why?

Think about the subtle, almost subconscious implications behind the 30-day guarantee. It literally tells you that youd best figure out pretty darn quickly whether you made the right decision or not. It also makes you wonder if your purchase will last much beyond Day 31. Do you get my point? The restrictive policy sends a clear message that you dont have faith in your own products, or that your faith is only good to a limited point. That message makes customers wary to make the purchase in the first place and more apt to return the product later. If you offer a 30-day guarantee, expect to see lots of returns by around Day 28 or so. The 1-year warranty is much better. However, it too sends the same message, albeit not as strongly as its 30-day cousin.

And the unlimited guarantee? Think about it a moment. The seller is so confident in his products that he is perfectly happy to stand behind them 100%. Confidence is contagious. We all like confident people. We want to know that the people we spend our increasingly hard-earned dollars on will be there when we need them. When do we need them? When things go wrong.

Whether you offer products or services and no matter how you offer them (retail location, online, in person, etc.), there is one question Id like you to ponder: What can you do to transfer the risk of purchasing from your customers shoulders to your own? Caveat emptor (buyer beware) may have worked in past centuries but it wont work in the new millennium. Ill say it yet again: Making a purchase, actually forking over money, is the ultimate act of commercial faith. Thus, my question stands: How can you make that decision as risk-free as possible? Answer: A strong guarantee. Find a way, any way, to relieve your customer of as much risk as possible.

Costco has one of the most liberal return policies I know. If something breaks or if you just dont like it, take it back, and youll receive full credit. I love Costco and have purchased my share of big-ticket items from them because I know they stand behind what they sell. They can do this because they sell truly excellent stuff. How can you emulate that model?

In my own business, I offer all new clients an initial consulting session. If they opt to continue using my services, I offer three more sessions. Then and only then do I bill for those four sessions, provided that the client is delighted with my services. If they are not delighted, we discontinue the relationship and they owe me nothing. Going forward, I bill at the end of every month of service. In this way, the risk is always where it belongs- on the sellers shoulders. My return (non-payment) rate among people who go the month is zero. Can you do something similar in your own business?

Yes, there are some things you cant and shouldnt take back, and Im sure you can think of examples without my having to go into detail. Yes, there is also the potential for abuse. The good news is that diligently tracking your sales can reduce any abuse to a very low level. You do track your sales, dont you? If not, there are lots of reasons why you should. Well get to that in a future column.

Find ways to reduce the risk to your customers and your profits will increase. I guarantee it.

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