Money back guarantee - how to let customers ask for the refund?

Jonathan Heyne Co-founder & CEO at Mentive

July 29th, 2015

We offer paid online courses that are taught by live teachers. We know that despite our best efforts, some users might not be satisfied with the service, so we offer a 100% money back guarantee if they attended the first 2 classes and do not wish to continue. How should the refund process work?

One option is to ask that they fill out a form and explain why they want the refund. We can then reply with a personal email trying to address the issue they raised and convince them to stay. If they are not convinced - we manually issue a refund. This will obviously allow us an opportunity to prevent some cancelations, but will also make the refund process somewhat more daunting for the users.

The other option is to have a simple “un-enroll” button, that automatically issues a refund. We could still contact them afterwards and ask for the reason, but we won’t be able to try to stop them from quitting. I’m also concerned that this is almost ‘too easy’ to cancel, and that with an even slightly longer process some users would end up staying for the whole course and actually being satisfied at the end.

What are your thoughts on this? Do you know of any studies or data that indicate that this decision has any effect on actual sales or customer retention?

Alex Eckelberry CEO at Meros.io

July 29th, 2015

Making it hard to get a refund is a sure-fire way to piss off customers.

In this day and age, if they don't like it, you give them the money back. You make it easy and simple. Think of yourself as the consumer.

Personally, I've always been of the feeling that if they don't like my product, I don't want to take their money anyway. It makes me feel like a thief. But that's just me.

Return rates typically are low. I'm not sure I've ever seen anything above 2% in my companies, but then I'm involved in software, not education. I also presume you have a decent product, so it shouldn't be bad.

Experience will be the best source of research data here.

Sergey Alekshin Market Research Expert Europe and Russia

July 29th, 2015

I think one of the options is go provide some free sessions, after that to charge money. Those who are unhappy with the service for some reason will drop off anyway. Thoso who will stay will be more motivated to pay for the service. However if they want to cancel - then I guess a good way is to send this personilized email where you work with their objections. If that fails - well - you will issue a return.

Michael Brill Technology startup exec focused on AI-driven products

July 29th, 2015

No data, but your intuition resonates with me. Make it easy and people will bail far earlier and more frequently than they would otherwise. Add to that all the people who suck and will press the instant refund button whether or not they got value from it, and it seems pretty ruinous. Plus you get no chance to really understand why people are requesting refunds (they're much more like to be "it's not you, it's me" once they've got their refund... while you still have their money, they'll give you the ugly truth).

Mike Rozlog Advisor at TechColumbus

July 29th, 2015

We offer both a 30-day trial with no refunds and a 15-day MBG. The 30-day trial is on our long standing product and we will work with customers if they need more time or have issues, but we feel that giving a 30-day trial is a good trade-off for funnel management. However, on our newer product, the 15-day MBG allows us to talk to the customer when they request the money back... this has been wonderful, as spending a few minutes explaining (DOS VM on Win Vista and above) has resulted in 98% reversal and the customer keeping the product. I feel if we had the 30-day trail on the 2nd product we would not get the opportunity to fix things because they would just not buy. One thing we do, is make them sign a document stating they are giving up there license, we de-active the license and refund immediately. Again, the paper is just another chance to have a conversation... we don't try to push the product at that point because there should have been a discussion already, but we use it as a fact gathering for what they did not like and what we could do better in the future. The best out of a bummer situation, as we want everybody who uses our products to love them... but the old adage is true, you cannot make everybody happy.

Yash Chandra

July 30th, 2015

I deal with this in my current business and I will tell you one thing: Either you offer refunds or you don't. If you offer refunds, then do not make it too hard for the customer to get it because most clients asking for refund were never going to be a good fit anyway. Of course, you can always ask for feedback from them but don't force them to give you feedback. Ask them politely. Make it optional. I always do the refund and then follow up with a personalized email asking them for feedback on what did not work for them.

Andrew Lockley Investments & consulting for tech startups

July 30th, 2015

Escrow the money for 24-48h after delivery

Alex Eckelberry CEO at Meros.io

July 30th, 2015

And meanwhile, we all rave about the return policies at Zappos and Nordstrom's.

Michael CISSP Attorney/Consultant at Self Employed

July 30th, 2015

It is a basic tenant of business to make inflow of cash easy and outflow difficult. That said, customers hate it. Extending the process or making it more difficult to try to convince customers to stay would be ill advised. However, I think you are hitting on a nuanced opportunity which is to find out what customers like and don't like about your product. To that end, you can provide a required survey to find out why users want a refund. If you can guide the perception to be the survey is an important part of customer empowerment, it will be a great tool for your business.

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