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Hack Your Refund Policy To Improve Sales and Referrals

As entrepreneurs we often spend our energy making a good first impression, while we pay very little attention to the end of a buying experience.


“It was okay. Except for the ending.”

Have you ever said that, or heard someone else share this remark, about a movie? It’s a common review of a movie with great special effects, an outstanding cast and good action scenes, but a mediocre ending. The ending can completely change a movie goer’s entire experience.

Now think about this same concept when applied to your company’s customer service experience. You have built a great product and created a beautiful company website to represent it. You even offer phenomenal technical support. But when a customer asks for a refund, you get emotional and stop caring. Guess which part of the experience your customer is going to remember?

As human beings we have a selective memory about our experiences. It is better explained by the cognitive memory bias known as the “peak-end rule.” This suggests that people seem to perceive not the sum of an experience, but how it was at its peak, and how it ended.

As entrepreneurs we often spend our energy making a good first impression, while we pay very little attention to the end of a buying experience. Thus by optimizing one of the key stages in our post-sale activities (i.e., the refund process) we can instead convince customers to purchase from us at a later date and become loyal brand advocates.

 

‘No Questions Asked’ Refund Policy

Some companies advertise a no risk, money-back guarantee. Generally this helps with the initial sales conversion because it increases trust. But like many others, when I first started my business, the refund policy wasn’t truly a ‘no questions asked’ transaction.

When a customer requested a refund, I took it personally as though we had failed. So, I wanted to go above and beyond to help fix the problem. I would offer further assistance, ask how we could improve, and then give customers the option to skip everything and claim their refund. I thought it was pretty hassle free. I just wanted to help, but I learned I was simply making it worse.

A customer shouldn’t have to jump through hoops to receive a refund. I would receive three types of responses while using this method. The customer would:

  • Give me feedback and request a refund;
  • Complain further, remind me the refund policy stated “no questions asked,” and request a refund or threaten a chargeback; or
  • Accept help and remain a customer.

From my perspective, as a developer, it didn’t sound like a broken process because I was getting valuable customer feedback. Yes, I had some angry customers, but everyone does, right?! I was happy helping users who remained loyal. But how do you really want customers to remember your business? Keep the peak-end effect in mind.

 

Optimizing the Refund Process

In order to create a memorable refund experience, I created a new process that truly offered a ‘No Questions Asked’ refund. Then I made the vision clear to our customer support team to ensure everyone was on the same page. Now, when a customer requests a refund, the following automated email response is triggered:

[hr]

Hey First Name,

Thanks for reaching out. Your refund request has been assigned to our team, and upon the completion of your refund request, someone from our team will message you to confirm your refund.

Thanks for giving us a shot, and please let us know if there is any way we can serve you as a customer in the future.

[hr]

Why did I use an auto-response instead of simply authorizing the refund? First, not every customer service representative has access to our payment processing accounts. During the wait time (i.e., within 24 hours), we want to stay in communication with the customer to confirm we have received their request and are working to process the refund. Not only does this create a better experience, but it prevents the customer from escalating the issue by initiating a chargeback with their credit card company.

Once the refund is processed, the following email is sent:

[hr]

Hey First Name,

Just wanted to let you know that your payment has been refunded. If you paid with PayPal, you will see the refund in your account immediately. If you paid with a credit card, it will take anywhere between 5-10 business days for the refund to be processed on your card. We sincerely hope that you can find your way back to OptinMonster someday, and please let us know if there is any way we can improve our product to make it better!

[hr]

After implementing this new refund process, three things happened.

  • The tone of responses changed completely. There were almost no complainers. Furthermore, customers expressed they would return at a later date and recommend our product.
  • The quality of feedback improved significantly.
  • Customer’s started to repurchase after trying our competitors’ product because our refund process and support convinced them to come back.

 

Changing Your Post-Sale Mindset

The biggest challenge you will face with updating your refund policy is changing your mindset. It hurts to see a customer leave, even after you tried to help them. When we asked questions prior to issuing a refund, we received some pretty ridiculous responses. We learned that people are more helpful when they’re happy. Angry and annoyed customers don’t give the most constructive feedback. By improving our refund process, we received useful feedback.

In turn, we use customer feedback to improve our product. In some cases, our product is simply not the best fit for a customer. However, after improving the refund process, we noticed an uptick in referrals from customers who previously requested a refund.

Refunds are not easy for any small business — or its customers. So, try to make your parting experience a pleasant one. Often, that’s the only thing they will remember.

 

This article has been edited and condensed.

Syed Balki is an online marketer with design and development skills. He creates cool sites like WPBeginner, List25, OptinMonster, SoliloquyWP, Envira Gallery and more. A version of this post originally appeared here. Connect with @syedbalkhi on Twitter.

 

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