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A Question of Money-back Guarantees and Marketing Your Online Products

Posted By Darren Rowse 9th of February 2011 Blogging for Dollars 0 Comments

_wp-content_uploads_34_gold_guarantee.jpgOver 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.

About Darren Rowse
Darren Rowse is the founder and editor of ProBlogger Blog Tips and Digital Photography School. Learn more about him here and connect with him on Twitter, Facebook and LinkedIn.
  1. I think that you only have to look at the users/sellers of Ebay to see that the majority of people are honest people. If this wasn’t the case Ebay would crumble to pieces. Every barrel has rotten apples though.

    • That’s worth thinking about.

      I’ve been thinking about the money back guarantee a lot and whether to add it in my squeeze page; I was really bothered because what I am working on is a virtual product and how was I sure that people wouldn’t take advantage to get a ‘free book’. But you put it into perspective…it is a sales I wouldn’t have had anyway. So this has definitely cleared the confusion for me. Thanks Darren.

  2. Wow, Thanks for sum up all your thoughts.
    I’ve observer there is an increase in trend of money back guarantee.

    Its does gave me assurance to buy.
    Selling ebook is my long term focus.

  3. As a followup to your blog, do you upsell in your ebook?

    For example, if you mention a piece of software, do you link to it via an affiliate link in the ebook?

    • I’d love to hear the answer to this as well. I’ve actually seen the up-sell in physical books in the past, and it always turned me off. Maybe it’s just an issue of presenting in a way that seems in context.

      Also, if you include the affiliate up-sell, do you follow similar disclosure guidelines to what you’d use on a post?

    • I’ve been put off when some ebooks seem to be just an excuse for a load of affiliate links, but if the content is genuinely useful and the services / products are relevant, I have no problem.

  4. Hi Darren,

    Yes, if you sell e-books through PayPal, then you might as well go ahead and throw the money back guarantee into the sales copy. But I think that’s the case with whatever payment system you use. It’s easy to file a dispute saying that the item wasn’t received just because it’s a digital product.

    In my mind it’s more a trust issue in offering a guarantee. I KNOW there are going to be refunds. Everybody in this business gets refunds, whether you’re a Darren Rowse or a newbie in the neighborhood. No one is immune. Refunds are a part of doing business.

    So it’s better to just put it the guarantee out there and use it to build a sense of comfort in the buyers mind, rather than having them not buy the product because you haven’t mentioned it anywhere in your sales copy.

  5. We’ve found the same thing at wpebooks. The amount of people looking for a refund is a small percentage of total sales. in our case, we hadn’t even stated any refund terms.

  6. Yes you will have a couple of dummies who know how to work the system..but you should just keep pushing your product because you can’t worry yourself about that..just keep moving..

    “Black Seo Guy “Signing Off”

  7. Thanks for reminding me about “moneyback guarantees” and how they are influencing buyers. I am finishing my ebook and I since the PayPal is going to be my broker, there is no reason why we shouldn’t offer them.

    By the way, bought your workbook, buying process went really smooth and applying the techniques from the challenge, they are inspiring and motivational. Highly recommend it.

  8. I would love to see the percentages on how many people actually used the money back guarantee. Sort of like those that never use gift cards given.

  9. Hi Darren,

    I’m launching my first product and I do offer a 60-day Money Back because you are forced when you sell products via Clickbank.

    Also, all marketers do it. You are correct on the first point, it brings barriers down and people feel like they can just jump in an try your product out.

    PS: If people want to see my money-back guarantee, just click on my name and when you land on that page, go to “In a hurry? Click here to get started today!” = you’ll see how we’ve displayed our money-back guarantee policy.

  10. Created my very first product last week and listed the 100% satisfaction / money back guarantee. I figure it like this…I put my blood, sweat, and tears into creating a product that I believe in. Therefore, if I’m selling it, then I’m saying to the potential buyer, “if you aren’t happy with what I did, then I failed you in a way that I did not foresee and that’s my fault. And I’ll gladly give you your money back and see what i can do in the future.”

  11. Very, very well said. I’ve been professionally involved in ebooks since 99, and your piece is spot on. Forwarding link to my Wordpreneur readers to save me the trouble of writing it. :) THANKS! -eldon

  12. I’d agree 100%. When I took my first E Book to market, I was really concerned about people doing this. I can honestly say I can’t think of a single case where someone has asked for a refund without a decent reason for doing so.

  13. This is a very timely post. I have been considering the creation of an ebook and would happily offer refunds. I simply don’t want to get into any disputes over the value of the book and would rather just give a no questions asked refund.

    I was considering using paypal as that seemed an easy way to manage the payment and subsequent download.

    What I’d like to know is, how easy is it to manage the refund process? From what you right above it seems like the refund can be applied for and granted automatically through PayPal without my intervention? This would be ideal.

    Can anyone go through the process in more detail? Is it like I would log on to Paypal, see a list of refund requests and then just approve them? Or will I even have to do anything if PayPal just grants it.

    My biggest concern is running the admin of returns. I’d hate to think I’d be there having to match email refund requests through to transactions on PayPal and then get into disputes if I couldn’t match it or just didn’t get round to it fast enough.

  14. Money back garnatee is great way of giving assurance to your customers, as they will feel comfortable in buying as they know if they have bought the wrong product they will get their money back.
    For retailers that are selling products which they have to post, could also have a look into a good return policy, to ensure that their customers have full peace of mind when committing to their product.

  15. Great post Darren, you’ve covered every question I had on the whether to offer a guarantee, even ones I didn’t think I had! I’m not surprised you’ve had so few refunds since you provide so much value in your products. Keep it up!

  16. I definitely agree on the money back guarantee removing the purchase barrier, I’ve always implemented this and recommend other ecommerce based businesses do the same if they want to increase sales, anything goes in the current climate.

  17. I feel as though money back guarantees are starting to cut into some publishers’ profits, especially those who go through a service such a ClickBank. It seems that most people with some experience with the internet know that with ClickBank they can request a refund at any time–and get one! As a result, costs are rising for those who haven’t yet figured out this “trick” in order to compensate for those who have.

    If selling individually, though, there exists some kind of social barrier that keeps people from asking for unearned refunds that isn’t there in the third-party sales process.

  18. Definitely good advice. I read from a sales book that the longer your money back guarantee, the more confident the potential buyer will feel. But, the longer the guarantee, the less likely they are to return the product.

    So, if you offer a 1 year money back guarantee, most people that decide to return the product will do so in the first 2 weeks anyway. Interesting how psychology plays into it.

  19. Giving the customer money back is always a great option. paypal now charges both the buyer and seller to give refunds. Imagine that huh? I refunded a customer from yawoop their bid link and I was charged 60 cents just to give the money back.

    I think refunds should be looked at carefully to make sure the customer can justify why they want their money. Either way I have never denied a refund yet.

    P.S. Darren I e-mailed you recently but haven’t heard anything back. It was regarding the blog engage rss service I hope to hear from you soon this is a great opportunity.

  20. I sell other products on Clickbank and had never truly understood the meaning of money back guarantee. This post explained about the matter definitively.

  21. I am writing an ebook to release in March and had not thought much about the guarantee. This actually helps me feel better about the process. I am a little nervous about offering a first product for sale, so having the guarantee will give me a little peace in the back of my mind that is worried that nodody will like my book!
    Thanks for sharing this info!
    Being productive in stressful times

  22. I agree 100%! We offer similar guarantees on our site… for all of those reasons! It’s worked wonderfully for us. From your eBook sales numbers, I’d say it hasn’t harmed you at all either! Awesome advice… hopefully more entrepreneurs will follow your example!

  23. I launched my first ebook last month and felt that a 100% guarantee was vital in establishing trust and removing the risk of trying my product. No refunds yet :)

  24. I may do an e-book in the future on helping you get started in your own graphic design business. A money back guarantee could be useful.

    I would also add that I think I’ve heard you say this Darren, that social proof also helps in the sale? The customer will only buy from you because they think that you have got experience and insight to help them go further.

    I would recommend a really good paragraph or two on your own credentials too.

  25. As far as i know (whatever i learned in affiliate marketing till yet) offering a money back gurantee is necessary, if you like to make it successful. Chris Pearson is great because he made thesis and money back guarantee makes him to sell more than 2 million copies of thesis.

  26. A refund rate of under 1% is very impressive, given that many people who sell digital products say 10% is acceptable. It is good indication that your products offer value and are priced appropriately – it isn’t hard to see why customers request a refund after paying $97 for a 10-page piece of junk, but obviously you’ve got the value-for-money aspect spot on.

  27. Money back guaranteed does not only works for selling ebooks or digital softwares.

    I offer a full refund on my physical things that I sell online as well where the buyers contact me that the item did not arrive.

    Even though some of them are scammers, that’s the risk of business anyway and still those lost did not affects my entire business at all.

  28. Great tips, I am in the process of penning my first ebook. I currently market a few for other people through my site, and these all offer money back guarantees. I see that some people to take up those offers, but not often really. For electronic products it seems a strange area, as there is essentially nothing to return, so it is all about trust. I think a money back guarantee is a way of building trust.

  29. For me free trial periods sounds more attractive then money-back guarantees.

  30. Great tips. I like it. Could you write about alternatives to paypal you actually used?

  31. Well said by darren, in my opinion offering money back is not a big deal but to fulfill your offer really matters. If you refund the money on the demand of your customer then it will bring very positive impact on the buyer. Your goodwill increases dramatically, consequently your future sales will increase.

  32. I was planning to write an eBook and I think this tool

    will add Value to my book before I release it for the sale.

  33. I was planning to write an eBook and I think this tool will add Value to my book before I release it for the sale.

  34. Doesn’t it really depend on the cost of the item being sold? Am I the only one on this string who questions the value of the money back guarantee… sometimes? I get what everyone is saying, and I agree… but….

    Let’s say you’re selling your item for $10. I kind of look at it like this. Sometimes you’re willing to “eat a loss” if it’s small enough. You might want to try a new shampoo, or a new food item, etc. so you say to yourself, “Eh. What the hell? If I hate this new shampoo, I only spent $10. I won’t die.”

    Know what I mean?

    I think I’m paranoid. I’m preparing to launch my third blog and I will be preparing an e-book (which I know little about and will research) but isn’t it conceivable that people will buy and download it and read it and then say they hate it and want their money back?”

    Am I being paranoid?

    Naturally, if the product is $97, a buyer might think twice about “trying” it, so in this instance a money back guarantee is really… necessary.

    Can someone address this? Thank you.

    • You have a point here. I recently bought a Clickbank product I thought would teach me something new. Price $19,99. Value for me after consuming the content: $0,-

      I did not ask for a refund though I considered it for a moment. I think many people thing and act like this. If it would have been $97,- I wouldn’t have spend money on it because my doubts would have been much larger before hitting the buy-now-button. No matter that there was a money back guarantee.

  35. Brent makes a good point about pricing. If people feel they are getting good value for money then they’re less likely to ask for a refund. However, if you tried selling a low quality e-book with about 5 pages of information for say $99 then I’m sure the refund rate would be much higher.

    It’s all about pitching your content at an appropriate level and giving people something of real value that they can’t get anywhere else.

  36. Hi Darren,

    I think I have to disagree with you this time.

    A money back guarantee does not differentiate you from you competition as almost everyone is doing it.

    If we have a look at the professional companies you will see that they don’t even bother to give a money back guarantee: Amazon Kindle, digital downloads over at The Gnomon Workshop a.s.o.

    It’s not that I wouldn’t refund the money to an unsatisfied customer. I would but I don’t promote it. To me it never happened that I got asked for a refund. Even though I promoted it in the beginning.

    What did happen was that there are illegal copies (at least 28.000 after the last check I did) on the Internet available. I could easily download one of this illegal copies and then find out who of the buyers was the source of spreading here. And of course I could sue him or her. But the question here is: is it worth the hassle and in the end you have to make hard that this amount of eBooks had been sold otherwise, I guess.

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