Last updateWed, 27 May 2020 11pm

Do you offer an Extended Money Back Guarantee?

I’m sure that headline alone will prompt a reaction from many a reader! We know how fickle consumers can be - surely offering an extended opportunity to return an item, beyond that required by consumer law, is only inviting problems for your business?

Potentially it may result in more refund requests than you are currently receiving; but let’s weigh up the cost against the benefit.

Firstly, what stops customers from buying? One of the key factors that makes customers hesitate is their perceived risk. What if the item is faulty? What happens if I find something better I like afterwards? What if I see the same item for less? These scenarios will play out in the head of your customer while they are making a purchasing decision. If you doubt this, listen to your own voice when you next make a purchase decision yourself. Understanding your customers is about tapping into their psyche, the same thought patterns you yourself use when you buy.

Let’s deal with the elephant in the room; the unreasonable customer who will only exploit the loophole you have given them. Firstly what percentage of customers is this? Do your sums - what percentage of items sold do you ever get refund requests for? Chances are it’s not as many as you think.

We tend to focus on the isolated cases and see them as representations of a larger percentage, but in reality this is often not the case. Your customers actually don’t want refunds - they don’t deliberately take the time out of their busy day to buy items they then have to return and argue with you over. This is not most people’s idea of fun! They are as interested in getting their first purchase right as you are.

Secondly, if you do refund are you any worse off than if they hadn’t purchased? Provided it’s not a specific order or make you can generally return the item to inventory, refund their money and everyone is back where they started. It’s not the end of the world.

So enough of the downside. How does refunding help your business? Again it deals with that issue of perceived risk. If your customer has unresolved issues then they won’t buy. If they believe the risk of buying is greater than the benefit of making the purchase then they won’t buy. Any steps you can take to reduce this risk will only increase their chances of making a purchase decision. Money back guarantees are part and parcel of the offering of most online stores these days. They have a distinct disadvantage over physical stores - no one gets to touch the product until they have paid for it. To reduce this perceived risk to the consumer they have made, in many case, freight free returns as a key part of their marketing mix.

Consumers are now expecting the same of brick and mortar retailers. The advantage you have is that the physical handling of the item prior to purchase will significantly reduce your chances of having a refund, plus you don’t generally have to bear any freight costs in having the item come back.

So how long should a money back guarantee period be? Answer? The longer the better. If I sold you a car for $25000 and told you that you had until 5 pm tonight to return it if you weren’t happy, chances are you would spend the next few hours giving that car a good workout and check over to make absolutely sure it was going to be ideal. If I told you however that you had a month to decide, chances are you’d relax and probably not get around to getting some of the checks you would have done if your deadline was more urgent.

We are inherently lazy by nature and we don’t tend to do things until we have to. Make the ‘have to’ as far distant as you can and chances are it won’t even be done at all. The longer the refund period the less likely they are to activate it.

So what’s your refund policy? Do you just follow the legal requirement and not a day more? Or do you use your refund policy as a marketing tool that can help get your conversion rate higher?

David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact This email address is being protected from spambots. You need JavaScript enabled to view it. or call 877-569-8657.