Risk reversal increases buyer confidence and encourages completed transactions.
A lot of the businesses I work with don't have a risk reversal strategy, and aren't really familiar with what one looks like, or the power it could have over their conversion rates.
Each time a customer completes a transaction, they leave your store or website with 99% of the risk associated with the purchase. Even if you overcame all of their objections and answered their questions about the performance of the product, the moment they hand over the money they lose their leverage.
If the product doesn't do what you say it will, or if it breaks down, your customer has parted with their cash and hasn't received the promised results. They've lost - or wasted - money.
So, risk reversal simply means taking the purchase risk away from the customer, and taking it on yourself or your business. When your business allows customers to make purchases without fear or doubt, you will encourage them to make decisions, spend money and complete sales because there is less at stake.
And whenever you can encourage more customers to buy from you, you will boost your conversion rate and your average number of transactions. So, offering a strong guarantee is a strategy that will increase conversions as well as repeat business.
In this post we will cover:
The relationship between risk reversal and conversions
How to use guarantees in your business
How to handle returns and claims
A step-by-step process for creating guarantees
A strong guarantee will reverse purchase risk and increase your conversion rates.
Essentially, guarantees take qualified leads and quickly convert them into repeat customers. When you guarantee what you sell, you take away the purchase risk from your customer and assume it yourself. When the purchase risk is taken away from the customer, they are more likely to agree to make purchases and you will close more sales.
People don't like to be wrong, or feel that they have been misled. They want to be sure that they made the best decision when they purchase a refrigerator or a new pair of shoes. They want the products and services they buy to actually deliver the results and benefits advertising. They are afraid of making the wrong choice when they spend their money.
When you provide a guarantee, you break down these natural barriers in the sales process, and the fear inherent in making large purchases. Guarantees usually shorten the sales process altogether because there is less need for discussion about objections. The customer feels that they can try the product out, risk free.
The best guarantees are big and attention grabbing, but still realistic. They're bigger and better than the competition, but still something you can actually stand behind. They tell your customer that you have confidence in your product, and that you "must be good at what you do" or you wouldn't guarantee it.
Guarantees and hassle-free return policies are also becoming the norm amongst many retail businesses and even service providers. There is a growing consumer expectation for returns policies that default to the opinion or experience of the customer. A guarantee or easy return policy can be the difference between choosing one business over its competition.
But aren't you worried about unhappy customers? Won't you see a pile of returns and service claims?
When I suggest implementing a risk reversal strategy to my clients, most of them are a little concerned. Most of them say something like, "sure, I'll increase sales with a strong guarantee, but won't the increase in returns and service claims put me out of business?"
This is a valid concern. Of course there are going to be customers who come back to you unhappy, or who want to take you up on your promise or guarantee. When you offer your customers a strong guarantee, you need to make sure that you stand behind what you are selling and believe in the benefits or results you're promising.
Don't guarantee anything you don't believe you can deliver.
Before you even think about guaranteeing results or benefits, you need to make sure that you stand behind what you sell 100%. You need to believe that your offering is a quality product or genuine service that is of value to your target market.
If you're concerned about the quality of your products or the service you provide, consider making improvements internally before you promise anything to anyone. If you employ staff who perform a service, make sure they're qualified and skilled at what they do. If you sell merchandise, put stronger quality controls in place, or consider buying from other vendors.
The reality is that you will get returns. Some customers will come in to scam or to take advantage of you, and I'll show you how to create a system to handle this. However, the point of offering a guarantee is to increase conversion rates (and revenue), so as long as the increase in sales is greater than the cost of the returns and claims, the strategy is working.
The majority of your customers would never take advantage of your guarantee.
The second important point I want to make is that most customers are too lazy or afraid of confrontation to take you up on your guarantee - regardless of how satisfied they truly are.
Your customers are too lazy to return to your store or send back the item they purchased. The same goes for services. Most let the specified time period go by, and simply forget about your promise. You may have even done this yourself.
Also, the level of confrontation involved in returns and service claims is usually more hassle than the customer is willing to deal with. Telling someone that you don't like their product or service can be challenging, and many don't have the confidence to do this.
So, once you're ready to stand behind what you offer, work through my easy, step-by-step process for creating your guarantee.
1. Decide what you are going to guarantee, and what you will offer customers if the product or service doesn't deliver.
Based on your knowledge of your target market, brainstorm a list of things that they look for or value in your products and services. Then, brainstorm a list of things that may frustrate them about the purchase experience in general. Perhaps they hate it when contractors show up late, or when take-out takes forever to arrive. Or, maybe it irritates them when they open a product package and items are missing or broken.
Here are some questions to ask yourself when brainstorming for your guarantee:
What does your target market value most about your product or service?
What frustrates your target market about your industry, or product line?
What objections do potential customers raise most often?
What is the level of risk that your customers take on in a purchase?
How much time do customers need to truly evaluate the product or service?
Guarantee results, not features or benefits.
As I've discussed in earlier posts, people buy results, not products or services. You buy younger-looking skin, not a spa facial. You buy a fresh-cut lawn, not a built-in lawn sprinkler system. Therefore, the strongest guarantees are made on results not features or benefits.
Take the items in your brainstormed list and identify a number of things that you can guarantee won't happen or will happen. Don't be afraid to think big - you can promise a lot more than you think. Once you have chosen a few things you can guarantee, make sure you:
Get detailed. Be clear about what you are guaranteeing, and phrase your promises carefully. Different words mean different things to different people, so ensure you are claiming something measurable. Two customers may have different ideas of what makes a product "work" or "last a long time."
Get specific about timeframes. Give customers a realistic amount of time to experience the product or service - very few companies can guarantee any product or service forever. Usually 30-days to 90-days is an adequate timeframe, depending on the purchase. This gives customers a deadline, and protects your business.
Are bold, yet realistic. Don't be afraid to get a little unbelievable you're your guarantee - it will grab your customers' attention and may make you stand out above the competition. Just be sure to be realistic and make promises you can deliver on.
Clearly explain compensation. If the product or service doesn't do what you say it will, what will the customer get, or how will you resolve the situation? Make this a big part of the guarantee, be specific about money, and try to go above and beyond a simple money-back refund.
Here are some examples of strong guarantees:
All of our products are guaranteed to make you feel stronger and healthier in seven days or double your money back - no questions asked.
Our services are guaranteed to be the lowest in the region. Find a lower price, and we'll beat it by 20%.
You'll be completely thrilled with your haircut and color treatment, or we'll make it right, right away, at no extra cost to you.
Buy any product in the store and test it out for 30 days. If for any reason - or no reason at all - you're not completely satisfied, return it for a full refund.
We guarantee you won't find a lower price in town - or we'll pay you double the difference.
If you find any defect in our installation within 90 days, we will fix it within a single business day at no extra charge, guaranteed.
2. Tell your customers about your guarantee.
Just like you did with your marketing message and your powerful offer, put your guarantee in places where your customer will read about it.
Include guarantees in your advertising, on your website, on receipt tape, in-store signage and newsletters. There are also many small ways to place visual reminders of your guarantee around your business. For example, put a small sticker that says "results guaranteed" on your merchandise or price tags, and modify all in store signage to mention your promise.
You can also send a newsletter or email to your database of existing clients to let them know about the new guarantees. You may encourage past customers to return, and single-transaction customers to become lifetime customers.
3. Train your staff on the details of the guarantee.
Script the details of your guarantee as part of the sales process to give your staff an easy guide to follow. Be clear on what is guaranteed, what the guarantee covers, and the process for claiming the guarantee in the unlikely case the customer needs to. If you decide to offer different guarantees for different products or services, make sure those differences are made clear.
In most cases, your employees will be the ones on the sales floor, using the guarantee to boost their sales targets. It's easy for a staff member to make broad or false claims during the sales process to earn the sale, but it may result in an increased number of unhappy customers coming back to return the item.
Clear, in-store signage that promotes and describes the details of your guarantee can be a helpful tool for both customers and staff. It will act as a visual reminder of the guarantee, prevent staff from making false claims, and allow customers to read the 'fine print' if they have detailed questions.
4. Have a plan for returns and claims
Create a system to handle any returns or claims you may receive as a result of your guarantee. Ensure your staff is trained to deal with upset customers, and that you gather as much information as possible from unsatisfied clients.
Create a standard claim form.Have every customer who makes a claim or returns a product fill out a standard form with contact information and details about the purchase experience. This will prevent return fraud and help you collect valuable information about your products or services, and about your guarantee.
Reason for claim
Create a claims log.Use a filing system or log for all claims and returns. Organize claim forms by date so you can review them on a regular basis and identify any patterns or issues that need your attention. You may need to make your guarantee more specific, or address any performance issues with the manufacturer or service provider. Claims should also be noted in each customer's file.
Go ahead and guarantee the products and services you offer and show your customers that you stand behind your claims.
Big, bold guarantees generate the best results, but if you're hesitant, test the waters with something you're comfortable with. Perhaps start by guaranteeing a new product or service instead of including a guarantee with everything you offer.
Remember to have a system in place to test and measure the conversion rate on your guarantees, as well as a claims system to monitor returns. If a particular product or service is seeing a high number of claims, you may need to modify your guarantee.
Until next time!
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