Has Your Business A Risk Reversal Strategy?
The concept of Risk Reversal is simple – but it requires some boldness and guts. Basically, it means that YOU, the businessperson looking to close a sale and allow your prospects to take that final step, should identify the various reasons a potential customer would hesitate to buy. You then think of little things you can do to overcome those reasons.
The Risk Reversal is like a Guarantee – but way more powerful. It’s a guarantee on steroids. The Arnold Schwarzenegger of all guarantees. The kind a buyer cannot turn away from because the buyer has nothing to lose and everything to gain.
Before we go there…let’s look at the Basic Guarantee that 90% of online and offline merchants usually have. Let’s label this Level 1 on the Scale of Guarantees.
Level 1 – The Standard Guarantee
A standard guarantee offers buyers a 30 day period to return the product for a full refund. This type of guarantee is required by law in many countries.
It’s mediocre and your competition probably offers it too. Truly successful businesses always go beyond a Level 1 guarantee.
The next stop is Level 2.
Level 2 – The Extended Time Period Guarantee
A Level 2 guarantee will extend this 30 days period to 90 or more days.
Many sellers swear by the 90 day guarantee. By giving the customer a full 90 days to try your product you often lower the refund rate.
Here’s why:
Let’s say Mary buys a €90 set of aerobics DVDs from your online store with a 30 day guarantee. It takes 10 days to reach her. Mary now HAS to test the DVDs in the next 20 days to see if she likes them. But she finds herself too busy. All of a sudden she has 2 days left to return the product for a full refund. It’s still sitting on her shelf untouched – feeling the pressure, she returns it unopened.
But if Mary had been given more time to try out the product, there’s a good chance she would not have felt pressured and may have taken more time to test, play and fall in love with the product.
If you’re selling products online, you can often create significant increases in sales AND lower your refund rate just by extending your guarantee to 90 days.
But Level 2 is nowhere close to what a guarantee can do.
Now we step into the Zone of Risk Reversal.
A few years ago, a guy by the name of Nick got frustrated because he could never find the right kinds of shoes he liked in the local mall. Nick went home that day and got online hoping to browse through online shoe stores – but there were few of them set up at that time in 1999.
Nick wondered if he could establish his own online shoe store. The idea kept jumping around in his head and eventually he quit his day job and founded Zappos.com.
At first people told him he was crazy. Shoes are something you need to hold in your hand before buying. You need to try them on. Feel the leather. Have your spouse see them on you and let you know what they think. There were a multitude of reasons to NOT buy shoes online.
Yet Zappos thrived. In 2005, the 6 year old company did $370 million in shoe sales!
How?
Well let me tell you what gets most people hooked on Zappos. Sure, Zappos had a wider variety than a traditional shoe store. But it was Zappos Risk Reversal policy that really makes most prospects into loyal customers. Here’s the decision making process prospects go through before buying their first pair of Kenneth Coles on Zappos.
- What if I don’t like that shade of brown? Can I return it? Zappos’ answer was yes.
- If I try it on and find it won’t fit – can I return it and get another pair? Their answer: yes.
- Will you pay for the shipping – and the cost of return shipping? Their answer was again: yes!
- If I buy it and then randomly change my mind – can I still send it back and get my dough back. Again – the answer was yes.
- If I bought it and then found one for a cheaper price on Canal Street, can I send it back? Again – yes.
They had an answer for every SINGLE doubt their prospects had. They were prepared to lose a little on return shipping because they were smart enough to understand that once their prospects bought the shoes – they would probably really like them and want to keep them. They knew their prices were good and they knew that once they got them hooked, they would be willing to tell their friends about them.
They were willing to bend over backwards to give their prospects the best service possible and eliminate every single doubt from their mind. No physical shoe store I know would place that much trust in a customer.
Zappos had effectively reversed every single doubt prospects could have in their mind. They made it a no-brainer to be their customer.
That my friend – is risk reversal.
My point is – Guarantee’s are fine – but they’ll only get you so far. Risk Reversal on the other hand – will make you millions and make your competition tremble in their boots.
This is where we come to Guarantees that effectively Reverse the Buyer’s Risk and make it a no-brainer to purchase from you.
Once you go beyond Level 1 and 2 – there are 4 more levels of Guarantees that fall in the Risk-Reversal Zone.
Level 3 – The Try and Then Buy Guarantee
This type of guarantee allows the buyer to pay only AFTER 30 days. The buyer pays nothing upfront or pays a small amount like €1 and knows that he will be billed later unless he cancels.
This is how this type of guarantee works. You allow the buyer to make a purchase for a mere €1 – €3.
They get to play around with the product for 30 days. At the end of 30 days, unless they cancel, they authorize you to bill them the balance owed.
Level 4 – Guaranteed Results or a Full Refund
Stronger still is the “Pay only if it works guarantee”. You guarantee a certain amount of results, say a 5 times boost in profits and allow the customer to claim a refund if this goal is not met.
This guarantee is not only fair to the customer – it helps close sales because you’re painting a positive picture in the customer’s mind of what your product can do for them.
Level 5 – Customer Always Wins
Next is the “Customer ALWAYS Wins” Guarantee. This is where the customer can return the main product for a full refund but can still keep the accompanying bonus gifts.
Let’s say you sell energy-efficient lighting. As a bonus on sales over €50 you offer the customer a free energy-efficient bulb worth €15. (Of course the bulb would have cost you only €5 wholesale, but the value to the customer is €15).
You allow the customer to return the lighting within 60 days if it doesn’t please them. And they can still keep the bulb as a thank you for trying out your store. So the customer wins – either way. That can be very reassuring.
Now you may worry – couldn’t people take advantage of your generosity?
The answer is yes – they could. But you’ll find that very, very few would actually do so. Most people are fundamentally good. When using this type of guarantee you will find that less that 0.5% of buyers attempt to misuse the system.
But so what if you lose €5 a few times due to a few unethical buyers. The increase in sales you get will more than make up for this. This guarantee and risk reversal policy works well because of the psychological image it sets up in the buyers mind.
Simply put: the buyer can’t possible lose. Even if they make the purchase and then have to return the light fixtures, they still end up with a free bulb.
The customer always wins!
That’s powerful risk reversal at work.
Now Level 5 is where many of the BEST stores stop.
But there is one more level you can use.
Level 6 – The Platinum Guarantee
This is where you offer the customer a double your money back guarantee.
It requires some boldness and you better have an excellent product! If you do – this guarantee can work miracles.
Here’s an example:
“If you implement at least 5 tactics from this book and haven’t seen a boost in revenue that puts a smile on your face, makes you more excited about starting your day each morning and deposits more money in your bank account – we will not only issue you a full refund – we will issue you TWICE your money back. We’ll pay you the cost of the book times 2. That’s €70. It’s the least we can do as a thank you for placing your trust in our business.“
Now that’s a guarantee. With risk reversal strategies like this, you will see your sales soar.
If you’d like to see further examples or a script used to create an overnight 50% boost in sales for their book please just let me know-brendan@peakperformancecoaching.ie
To Your Success.