How to Reduce Refunds
Ben Prater is a guy I have never exchanged words with, unfortunately. He is an expert Internet marketer and has a way of reducing refunds that is pretty damn effective.
He is similar to me because he sells infoproducts in the "make your own software" niche, but he focuses more on the managerial, engineering part of that niche than I do. I am a do-it-yourselfer, he is an idea guy.
I'll never forget his best product… called,
"Software Secrets Exposed."
His sales letter sells you the story of what you can do with his book – his friend at Microsoft who worked in a high tech office and went to the Ferrari factory himself to make sure they painted his six-figure car the exact shade of purple he wanted.
I bought his book in 2003, before a lot of people had thought to direct sales into autoresponders or even save those leads at all. But Ben had thought of that.
You buy from him and you are automatically added to a follow-up series that sends you an automated, personalized message every few days.
When you first purchased, you got the book. After 7 days he sent a 30-page bonus report with a sample blueprint (just like the ones he talks about how to make in his original book).
He sent out more bonus reports after 14, 30, 45, and 60 day periods. They were either bonus chapters that wouldn't have fit anywhere in the book, or interviews with others – which are even easier to make than reports!
He didn't always simply give away the bonus materials… sometimes he asked for something in return.
For example, in one follow-up he offered a report on a related subject – but to get the report, you needed to provide a testimonial for his original "Software Secrets Exposed" e-book. Look at that sales page, it overflows with glowing testimonials!
If you can spread out the bonus items like he does, you will cut down on refunds because those people who refund immediately won't get the bonus items. If you can string them along for long enough, they might pass up the refund period!
When information is cut up into pieces it has a greater "thud" factor. Five twenty page reports all with their own sales letters have a higher value than a big 100 page book, even if contains the exact same information.
Spreading that information out over time gives it even MORE value, because your customer is more likely to read the information given to them in pieces than trying to sift through a huge pile of stuff the day they purchase.
I'll admit, I don't have a follow-up series for every product -- that would take time away from creating new products -- but every now and then I choose one product randomly and spend a minute or two writing a follow-up for it.
It doesn't have to be anything super valuable. You could:
- Remind them to download the product. (7-day followup)
- Ask what they thought of the product... which you can then use as a testimonial. (14-day followup)
- Offer an affiliate link and a solo ad they can copy and paste and send to their list. (30-day followup)
- Send a special discount link to another one of your related products. (45-day followup)
- Give them a surprise bonus report. (60-day followup)
That's how you reduce refunds. Advertise these items in the sales letter as a 7-day bonus, 14-day bonus, and so on.
On a forum I called this strategy:
"Turning a one-time product into a short-term membership site."
If you give a refund, immediately zap them from the update list and block their IP address from your site.
Recently, I paid through the nose for the rights to Software Secrets Exposed, setup a web site and an affiliate program, and added the bonus reports as autoresponder follow-ups just like Ben did.
Do you have any advice on how to reduce refunds? I don't mean legal issues like disputing transactions with PayPal, but ways to turn refunds into a good thing. (In this case adding more long-term value to a product.)
Filed in: Product Creation
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- This reduces refunds AND gets you testimonials like CRAZY!!! - Page 2 | August 22, 2008
Having a no-quibble 100% money back guarantee is definitely a powerful technique to improve conversion rate on a sales piece, but if you want to minimize the amount of refunds, think about testing a “No refunds” strategy.
I have a number of clients who do this with higher-ticket digital products ($77-97) and they told me before they were happy to take less money and not have to deal with “time wasting leeches” (their words).
Nick, what payment processor did your coaching clients use? I use Clickbank, which has an 8-week refund policy for even the most ridiculous of reasons. I also had someone write FIVE bounced checks in a row for digital products.
Recently PayPal has become just as bad as Clickbank. They used to fight chargebacks for you but not anymore.
I also have an open PayPal dispute with someone who wants a refund just because I don’t answer e-mails on weekends. He sends an e-mail on a Friday night and by Saturday morning he is sending more e-mails asking why I didn’t get the original messages.
Last week I dealt with someone who ordered using 3 different alias and 3 different shipping addresses under the SAME PayPal account, over a period of several MONTHS, and is only just now claiming it was an unauthorized transaction.
Last month somebody ordered FOURTEEN of my products over the span of one hour, then one by one said it was an unauthorized transaction and PayPal reversed the charges within minutes, giving me no time to respond.
Needless to say February was a nightmare for me as far as refunds, and even though I provided proof from server logs that these transactions were valid, they were ignored.
So Nick, were these people PayPal/Clickbank users that simply did not advertise the refund policy? Even with your own merchant account, you have to keep your percentage of chargebacks under a certain percentage or risk getting your account shut down… how do they do it?
Hi Robert,
We sell several softwares, and in each of them there is a block process, in case people ask for a refund.
Some have tried to get a free product 😀 by telling Paypal it’s a non authorized use of their account, but we have one solution.
Now the question I am asking me, is why “gurus” have put a “no question asked refund policy” ? If they want to refund, why not give the product for free 😀
It seems obvious to me that refunds are directly proportional to the lack of follow-up with customers, not to mention pre-sell. Of course, there are always those who will try and subvert any system anyway.
I thought the whole refund policy was a numbers game – am I missing something here? Sure, you will get certain people who will always try to steal your products. So you automate the processes that prevent outright stealing AND the process that returns what they paid, while cutting them off from doing business with you again. You can’t please everyone, or expect everyone to be pleasant, so don’t try. If you are getting a refund level that pisses off Clickbank, Paypal, etc, then either you need to give customers more, or perhaps it means the public are changing, which you can’t stop, but the payment processors will eventually react to this, because they must and it looks as though they already are beginning to. Just my humble 2 cents.
In this discussion, Paydotcom has not been mentioned yet.
What are the opinions on using this payment processor?
Paydotcom isn’t a real payment processor. They are a PayPal wrapper. If someone wants a refund they still go to PayPal.
That creates a whole other headache, because with PDC you manually pay affiliates at the end of the month, so you might get a sale, pay an affiliate, then have to pay a refund… so that money you paid to the affiliate just came out of YOUR pocket.
I have tried the above on a couple of my sites and found it really reduces the refund rate. People tend to hang on because they are not sure what they are going to get and when they are going to get it.
Personally, the only time I get a refund for a product I’ve bought is when what I’ve purchased isn’t the same as what was sold to me, i.e. the description was way different to what the actual product was.
I think adding value through the above is an excellent idea and I will put it in place on more sites now!
Thanks Robert!
Jason
Hi Robert,
I REALLY enjoyed your post this morning. It gave much food for thought.
Your response to Nick was even more enlightening as it clarified for me where your question came from.
Human nature is a funny funny thing. People can “turn on you” in an instant, and your friend understands that.
He mimimizes refunds in several ways as you suggest.
More importantly, I think his greatest success is in connecting with people in a more personal way.
By using personalization he is connecting in a subliminal way. People want to be connected with, and #1 in that process would be calling them by name.
Next is by going beyond the point of sale and the value of the original product, by introducing even more value with his follow-up bonuses and updates to the product.
People LOVE gifts, especially if they have value.
Sometimes life happens though. People may think one moment that they’re interested in something, and the next they may realize they really weren’t. The difference may be in whether your copy SOLD them on the product and it’s value, or if the customer SOLD THEMSELVES on it’s value.
However there are obviously times when there is no other option but to entirely sever the relationship permanently and irreversibly. Fraudsters abound, and merchants have every right to protect themselves from people who only seek to steal, or cause sabotage with payment processors out of petty envy and spite.
Thanks Robert for the insights on click bank. I am beginning to find out the follow-up messages are very important to keep customers happy and to assure them of you being there for them when they have questions.
I was one of those click bank begginers that found out about the extra charges for an account with out traffic to it. A rude awakening when you get charges against the account.
I also use paypal for my payments. Between the two I haven’t really had any problem with refunds but it is interesting to use the idea of following up on two to three week interval for more information on upgrade materials or new products.
I am currently creating a blog with a new idea. I will actually have the product built into the blog. I am offering people to write articles on my blog and in return share ads for click bank products. It is still being develope as I write this post but shoudl be complete by the end of the week. The cool thing I think that will help the authors of the blog I will also offer a automated follow-up message of articles with the same ads in the messages. The follow up message will actually become a Newsletter published weekly.
Robert,
One strategy is to actually send them a physical product that they would have to return. That makes the barrier to an easy refund a bit tougher.
You also get the physical address, which should cut down on the fake transaction addresses.
It was a good post, although I have to admit the reference to the purple Ferrari didn’t make sense to me.
Robert,
I suppose there will always be scumbags that try to rip you off. Usually the extremes that software developers go to to protect their software only complicates ownership for honest buyers, while doing little to prevent theft by serious theives. I think Ben’s approach (sequential bonuses) combined with great products (like you deliver) should be sufficient to allow you to build a loyal base of honest customers. If so, ignore the scumbags and focus 100% of your effort nd attention on making loyal customers happy. That seems like the winning formula to me.
In the UK, we have “Consumer Protection (Distance Selling) Regulations 2000”, which applies when you sell goods or services by the Internet, Digital Television, Mail Order, Phone and Fax.
The key features of the regulations are:
1) You must give consumers clear information including details of the goods or services offered, delivery arrangements and payment, the supplier’s details and the consumer’s cancellation right before they buy (known as prior information)
2) You must also provide this information in writing
3) The consumer has a cooling-off period of seven working days.
This last point means that we MUST provide a refund by law if it is requested within 7 days.
It makes it very difficult when the item you sold is not a tangible item such as an ebook, software, ringtone etc.
You can’t be sure that the buyer has deleted it.
As a programmer, maybe I should make all my software expire after 7 days and then issue a new key to people who have not requested a refund.
Good Morning Robert…
Buttering up pigs (thieves), with follow-up emails, only makes them greasy.
They’re still pigs.
With the items you produce, I suggest a ‘shut-down’ capability. Mr. Ian Traynor has such a factor: ‘Viral ListStorm'( cheatkitliststorm ). When chargebacks start flying, you’re in control.
Once burnt…the pigs will feed elsewhere.
You’ll be driving up your competitors’ costs in the process…Don
Plank wrote:
“If you give a refund, immediately zap them from the update list and block their IP address from your site.”
Oooo. That’s bad advice, Robert. I mean the part about blocking the IP address. That’s just vengeful entrepreneurship which does nothing but to hurt the entrepreneur. You see, the vast majority of people do not have a dedicated IP, they have a dynamic IP. Sure, they might keep an IP for days or weeks, but they will eventually drop it and be assigned another one, so ultimately, they have a dynamic IP. The IP that was dropped is then assigned to someone else. That “someone else” will then be blocked from your site for no good reason and therefore you lose potential sales.
I had a cable connection at one time and I would keep my IP address for months on end, even if I shut off my modem overnight. But that does not happen to most people with cable – they get a new IP address more often than that. Now I have DSL and I get a new IP address every time I shut off my modem for more than 5 seconds.
The key to refunds is to realize that there will always be refunds and chargebacks and to expect it when going into a venture and price your product accordingly. There is no real secret to reducing refunds. I think we internet marketers have to look at things more realistically and positively. We are able to start up a business and make tens of thousands of dollars (and even more) in a year with very little overhead and in our own home offices with no real costly physical contact with the outside world – as opposed to our offline counterparts. Don’t dwell at the downside and don’t let it get to you as you cannot do much to change it and trying to and worrying about it all the time costs you a lot of time and therefore money. The followup thing you suggested might be good to reduce refunds and I would say go for it, but not because it reduces refunds but because it creates a good image for you even if it does not reduce refunds. IOW, forget about the refunds unless there are so many that you cannot stay in business. If that is the case, then the problem is most likely on your end and in your product, not in “the systems” you use.
Also, realize that some markets/products have a higher refund rate than others. One of those markets is the biz op/make money/make more money/IM market/products, especially those sold with pie-in-the-sky sales pages.
BTW, I believe Paypal still does fight chargebacks however the charged-back transaction has to be for over a certain amount. I think it’s over $100 or $150 dollars. They don’t seal with the smaller dollar amounts as it is too costly for them to bother with.
Dan
I appreciated your post but these comments about refunds are quite negative.
Use 2Checkout instead of clickbank as your merchant account. They now let your customer pay with paypal.
Besides you can always turn the refund situation around and say “Your money was refunded. I’m sorry my product was too complicated for you to understand at the present time. Please keep the product and use it when your expertise is ready to learn from it.”
Let’s get serious — we are offering digital products. Once the ebook, software or whatever is produced and ready for sale, there’s no more work that has to be done.
So if your product is excellent quality, you have maybe one or two refunds. No big deal.
Quit worrying about the refunds and go on to make even better products that give your more income.
Judith
P.S. The autoresponder ideas are great. Thanks for sharing that information.
Judith, that is usually my attitude as well but when there are these huge number of chargebacks, it’s really discouraging.
If someone can use PayPal to pay with 2checkout, then they can go to PayPal to make a claim and get their money back.
Dan, that $100-$150 limit would make sense. PayPal isn’t fighting my chargebacks because they are for several $20 products in a row, so in total I’m being scammed out of hundreds of dollars but because the individual transactions are low dollar amounts, they go right through.
But I do like your way of thinking about it… it’s only an issue if it drives you out of business. My refunds rate is less than 1%.
About blocking the IP, I don’t consider it vengeful entrepreneurship… it keeps the person from ordering from me again! Before I started doing this, it was VERY common for a refunder to order a new product from me again.
There are 4 billion IP addresses in the world… the chance that someone else will happen to get that IP address is very low, even if you block the ENTIRE subnet.
Thanks guys, I was feeling crappy about these people who refund for no reason but some of these comments really put it into perspective.
Hi Robert
The best attitude is ALWAYS: “Never ever give up!” Regardless of how some will scam for small amounts, I think the blocking of IPs seems fair.
That some will buy a second time is encouraging but if they even had the audacity to ask for a second refund we should have a website with e-mails listed as wannabe-scammers.
It may sound harsh but those who SUBVERT our chances to run a decent business of benefit to all the honest people should not go “unpunished”…
Just a thought, anyway. 🙂
I have found that disabling the echeck option on clickbank reduced refunds substantially…
Good idea Ari. I disabled online checks in Clickbank after that one guy wrote me 6 bounced checks in a row.
Thank you Robert, for reminding me with
Ben Prater & his Software Secrets Exposed…
One of the ‘classic’ Internet hits 🙂
It has been, what? like 5 years or so since he launched
his report?
Online, that looks like 20 years of the offline world’s time 🙂
Great article as well,
Tamer