This might be the most expensive blog post I’ve ever written, but here goes …
This week I was talking to a developer who sells open source products and their attitude was that they fight even single customer refund request..
I was pretty shocked – we always, always give refunds. Over at Open Source Training you can get a full refund at any point during your membership – any point, even 5 months and 30 days into a 6 month membership.
I told the developer that we’d write up a list of our reasons to see if he was convinced:
- Trust. Placing a clear, generous refund policy on the sign-up page really helps. We hear variations on this all the time from customers, “I thought I’d try and well, I could always get a refund if I didn’t like it.”
- People are honest. Not 100% of course, but 95% or more. The vast majority of refund requests are for honest reasons – either they’ve screwed up or we have (we sell susbscriptions so I’m prepared to admit the percentage might be a little lower for people selling tangible goods, but not by much).
- Pick your customers. Seth Godin talks about this one frequently. Most refunds come from people who didn’t both to read even the big, obvious instructions presented on signing up. A good percentage of customers who want refunds would be money-losers in the long-run, costing more time and effort than their worth.
- Learn from refunds. I always ask people “what could we have done better?” when processing a refund. The happy customers rarely good good feedback – the unhappy wants often give brutal, accurate feedback.
- Refunds can make unhappy customers in happy one. I’ve got plenty of customers today who we’ve given refunds to at some point. Some got to use the service for free and changed their minds to become paying customers. Others said it wasn’t for them but referred their own friends or customers – the refund was a sign that they could trust us.
- You can’t fight refunds anyway. If a customer asks Paypal or another payment processor for a chargeback, they’ll always win. That’s the default position. Back when I started selling online I’d spend hours accumulating evidence for PayPal showing clearly how someone had scammed us but they just ignore it. I think I won one chargeback once and fell of my chair in shock. Overall though I wasted plenty of time chasing the bad old customers that would have been better spent on finding good new ones.