Stick strategies for reducing refunds

From: Joe Alexander
Operations Manager, The Online Marketing Letter


Dear Friend,

Whether you are new to Internet marketing or are a seasoned pro making six figures a month, there is one occurrence common to everyone, refunds!

While no one can guarantee to stop refunds from happening, today we will discuss ways to reduce their number, and help you keep more money in your bank account!

In many cases, customers are simply looking for their $50 to $100 to back to buy gifts or pay bills. Of course, if the person really needs the money for food or shelter, it's best to give it back and remove them from your list.

But many potential returns, perhaps 50% or more, can be saved. Learn how to prevent customers from initiating a refund to begin with by following a few simple steps.

The expectation set up in the sales letter wasn't met: In many cases, this is a packaging and design issue. I'm not saying you need extra bulk or a killer graphic on everything, but it doesn't hurt. Many customers immediately inspect their purchase, even though they may not intend to use it for a while.

Customers have an expectation in their head, and if you meet or beat it, they relax and think to themselves, "This thing I just bought is great, and I'm glad I have it. I can relax now knowing I made the right choice." But if you don't meet it, they think, "I have to get rid of this bad decision I made, or it's going to drive me crazy!"

Physical products should be packaged well, and shipped in a clean white box with bubble-wrap or other protective layering. Digital products like e-books, courses, or software should have professional graphics and be visually pleasing to the eye

Above all, the look and feel of the ad they bought from should be reflected in the product they receive so there is continuity in the buying experience. Ensure the logo you use on your web page and advertising is on the packaging. This will increase your consumer’s confidence.



The download page, delivery system, or confirmation process didn't work: It's amazing to us that simple user-experience issues plague the online world, especially since there's so much low-cost technology around. But I guess other people's problems are our blessings! (Especially if they are competitors.)

Before you launch a sales process for any product, make sure your post-purchase thank-you pages are up, receipts are automatically mailed to clients, and e-mail confirmation letters are sent.

After you have everything set up, both you and someone else should initiate 3 - 5 test purchases to see what customers go through as they complete a transaction. Have your helper make notes about their experience. Make sure everything works instantly and seamlessly. Modify as necessary before launch.



The product arrived late or not at all: If you are sending physical products, mail them the same day so they arrive quickly. We send everything by Federal Express, and this alone reduces refunds since people often get their order in a few days, and are amazed at the speedy delivery. Make sure you track shipments to follow-up with customers, and if you have the technology, let your customers track their own orders. This creates anticipation, rather then nervousness. Buying decisions are made on emotion, and the longer the time elapses between purchase and delivery, the greater chance your customer may change their mind! Strike while the iron is hot!

If you are marketing digital products, like e-books or downloadable software, they should be available immediately upon purchase. By using ClickBank or a system like EasyOnlineSales.com, this is simple to achieve and allows the customer to receive their product right after buying it.



The product or service didn't work as advertised: If your product sucks, fix it. If it's a book or info-product, rewrite it or hire someone else to. If it's something technical, like programming or scripting, get someone from eLance to do it. If it's a physical product, have it redesigned so it works. Eliminate quality-issue refunds by making your product or service excellent.

Contrary to what some Gurus preach, don't sell junk. If you must, do so only on a limited basis to test your sales process. As soon as you know it works and there's a demand for what you want to sell, stop marketing and correct any product deficiencies before you roll it out.

Set up negative qualifiers in your initial sales copy: The easiest way to set expectations is to not create them in the first place. If refunds are a big issue for you, and you have addressed quality issues, rather than oversell or use hype in your sales materials, consider a slightly different sales approach. Instead, use qualifiers to "push" prospects away. The losers will eliminate themselves, and the winners won't mind the few extra steps:


Money qualifiers: This is where you say something like, " If this purchase will compete with your rent money, or you'll have to take food off the table to pay for it, please don't buy it!" We use a variation of this in almost every big-ticket item we sell, and it's a real fast way to separate serious leads from tire kickers. You can also require a minimum investment and lay it out upfront like many franchise opportunities ("You must have $150,000 minimum in capital to invest in this opportunity.")


Experience qualifiers: Like the money qualifier, this sets out conditions for participation, like a minimum skill, knowledge, or even motivation level. It eliminates casual prospects from the sales process. Those who meet the minimum standards stay, those who don't leave.



Create post purchase "stick" letters and follow-ups: A great post-purchase follow-up sequence includes an initial thank you, a follow-up to make sure you received the product, a testimonial request, and additional back-end offers.

Create your own stick sequence specific to your industry and test different variations. We have found that post-purchase buyer remorse is directly related to post-purchase merchant follow-up, or lack of thereof. After someone buys, many merchants feel the sale is over. Yet, to a customer, the sale has just begun! Remember this as you design your follow-ups, and you'll keep customers engaged and satisfied.



Follow-up with post-sales unadvertised bonuses: This is a great way to increase the customer's "attitude of gratitude" while reducing refunds and setting up back-end sales. The strategy works if the bonus adds value to the main product, if it helps the prospect move toward their ultimate goal, or if there's real apparent value.



Ask Refunders why they want a refund: Many people buy, but have some small problem with the transaction. Rather than request a fix, they simply ask for their money back. That's because the customer service experience of the average person is often so bad, they dread dealing with anyone anytime for any reason whatsoever. If they have to contact customer service, they may as well just ask for their money back!

Do a simple post-refund survey to discover easily correctable deficiencies in your sales process, from security alerts on order pages, to missing shipments and broken autoresponders. Correct these as soon as possible, and you not only reduce refunds, you also increase back-end sales.



Create a continuity version of your product: We have discovered if you are selling something low cost, like a diet pill or an e-book, you may receive an inordinate amount of refunds when the economy slows down or holidays come up.

However, if you have a continuity program, where you bill monthly for an autoshipped product or private membership site, customers will likely pay for the first few months, and just cancel if they are dissatisfied, rather then request a refund. This strategy has been used by many to turn a money loser into a profit-center by simply changing the payment terms.



Personally phone or direct mail prospects after they buy with a quick thanks or special bonus: This doesn't make sense for every business. The break-even point comes after you have analyzed your price point and back-end strategy, and know the lifetime value of a client.

If you or a senior staff member personally contact buyers a few days after they order (especially by telephone), they will be so shocked and amazed, they'll not only keep the product, they'll probably buy everything you try to sell them for weeks or months afterwards.

One of our closest associates did this with his first 1000 sales, and leveraged the relationships he made into a $5 million dollar a year consulting agency dominating his competitors.



Create cumbersome refund procedures: There is an ethical conundrum to be reckoned with here; mainly should you discourage refunds, and if so, how far should you push it. Cumbersome procedures range from break-away packaging that self destructs for physical products, to requiring lengthy surveys or questionnaires for downloadables.

Remember though, this strategy can backfire, and you could end up losing customers because prospects see your guarantee as too conditional so they avoid doing business with you in the first place. Also, if you make it too tough to get a refund, you'll find some customers just charge back the purchase with their credit card company, creating the very problems you are trying to avoid.



Re-solicit refund requests with longer guarantee periods: This strategy is used by Carlton Sheets (and a few other high-profile marketers) on people who attempt to return his home study course. In order to get a refund, the customer usually has to call a refund number before their guarantee expires and get an RMA number (Return Merchandise Authorization).

During the course of the call, the operator says, "Hey, I notice you've only had the course a month, and there's a 3 month guarantee. We really want you to go through the materials, apply some of the principles, and become successful with this, so I'm going to double your guarantee to 6 months, so you can relax and take your time reading through it."

If the customer wants the refund, they send in the package and RMA number and get their money back. But many are lulled by a renewed sense of safety and security the longer guarantee conveys, so they keep the package.



Remove customers from prospect follow-up: One of the big reasons people ask for refunds is because they aren't taken off the prospect follow-up list after they buy. They keep receiving what is essentially spam, which they equate with you, your product, and your company. Since they already bought, they are reminded of their purchase whenever you re-solicit them.

E-commerce systems like EasyOnlineSales.com have multiple autoresponders that can be programmed to turn off one sequence (for prospects) as they turn on another (for customers). That way, the entire process can be set up automatically.



Include bonuses or product features that disappear upon refund: This is a very effective way to reduce refunds; just make one of the "must have" features or bonuses disappear if a refund occurs. In some cases this can be discussion board access, a freebie consultation, or some sort of remotely disabled software. In other cases, it can be a series of information reports, the most valuable of which are sent after the refund period expires.



Institute fraud protections: Nearly 25% of all chargebacks are due to fraud or stolen credit cards, and these are 100% indisputable (you can't fight them). Institute protections in the form of address verification, required CVS fields, and consider banning free-emails or certain countries from online ordering (require faxed or scanned credit card images with signatures). Take a look at our previous article on the subject located at:
http://www.marketingletter.com/members/oml_50D.html



Start a blacklist: We hate to sound like Joe McCarthy, but if someone refunds a certain number of products within a certain period of time, we add them to a list of banned buyers. The next time they try to purchase something a note pops up during the order process and tells them they can't.

You'll have to decide what your own personal refund tolerance is, but we suggest that anyone who has bought and refunded three items in six month probably isn't a real customer.