A money back guarantee, when used properly, can be a great way to build trust with your customers and make it easier to generate conversions and drive sales.

Money Back Guarantee

Everybody is interested in finding ways to drive sales and improve conversions. Many people, however, are afraid of using a money back guarantee. The idea behind these guarantees is to build trust with your customer base while removing unnecessary friction in the funnel of conversion. It can seem complicated and even a bit scary. Many other companies seem to be able to use money back guarantees with relatively positive results, though.

A guarantee normally takes form as a written promise between a company and its customers and pledges to provide things like:

  • An expected level of quality
  • Certain content
  • Specific benefits
  • Customer satisfaction
  • Products or services that perform as expected

Guarantees also detail what should happen in the event that the buyer is not happy with their purchase.

The idea of a money back guarantee is nothing new. In fact, an entrepreneur by the name of Josiah Wedgwood is often credited with developing the concept in the 18th century. While Wedgwood was, quite possibly, the first to use such a tactic, he was definitely not the last. Since the inception of the money back guarantee, a wide variety of entities have adopted them, from major corporations to small family-owned businesses.

It can be easy to wonder if a money back guarantee is worth it for businesses to put in place. A company must decide whether the risk involved with providing customers an opportunity to default on their purchases can outweigh the public relations benefits. There's no easy way to resolve this concern. However, common sense might suggest that, given the number of companies that have used them over the years, money back guarantees may not be such a bad idea.

When taking some of the negative aspects of these guarantees into consideration, however, it's wise to consider the possibility that they may backfire under certain conditions.

The Pros of a Money Back Guarantee

It's worth considering that, if a particular business tactic has remained in use for nearly three centuries, there are probably reasons that companies continue to use it. There are a number of benefits to keep in mind when considering why so many businesses are still using money back guarantees today. These benefits include:

  • Removing purchase barriers
  • Differentiating your brand from competitors
  • Providing enhanced customer service
  • Improving your customer retention
  • Building trust with your customer base

Removing or minimizing purchase barriers is possibly one of the biggest advantages that a money back guarantee can offer. These barriers are removed through the act of building trust with customers. Simply put, if your customer doesn't like what they bought, they have the reassurance that they can get their money back. This is particularly powerful in online sales scenarios in which customers don't have the opportunity to see or try a product in person before they decide to buy.

With a money back guarantee in place, customers feel more comfortable with the fact that they won't be stuck with the product they're buying. Simply by offering a money back guarantee, you're letting potential customers know how strongly you believe in your product and that it really is worth the price you're asking for it.

Purple, a company that sells mattresses online, is a great example of just how effective a money back guarantee can be. One of the first things you see on their website is a promise that, if you don't completely love the mattress after sleeping on it for 100 nights, the company will come get it and give you a 100 percent refund. This may not seem like a big deal at first. Consider, however, the normal price points in the mattress industry. A mattress can easily cost over $1,000, making them a significant financial investment and not something that most people are prone to buy on impulse.

Because a mattress is something most people use for many years, customers want them to be as perfect as possible. Add to that the fact that Purple's customers are buying mattresses online. They've never seen or touched them before making their purchase decision. With the company's 100-night guarantee, however, many fears are negated. Purple sells quite well.

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