Episode #4: “How Guarantees Can Revolutionize Sales”
As we have discussed quite a little in a previous episode, I want to take a look, but from a different angle to this really important question of “why would I want to buy from you?” You know very well by now that competition over the internet is crazy.
Instead of a brick and mortar store spending money on a lease, you give it to Google or Facebook in the form of ads, the developers as they build out the experience, and your employees as they keep customers happy. We aren’t here to discuss the comparison of online vs offline, but what I want to share with you is something that will apply in both scenarios.
In a world where businesses struggle and grasp at anything they can do to set themselves apart from the competition, we look for new and fresh ideas. Yet, those new and fresh ideas can be really valuable.
I am a merchant, and love most every minute of it. About 20 years ago, I began programming, when I was 10. Feel free to do the math—yes, I may be younger than you. Close to 10 years ago, I began focusing exclusively on the online commerce platform Magento. I demonstrated my learning by passing and achieving Magento certifications. To pass this, I wrote pages and pages of notes. I began sharing this. Ultimately, thousands of people have used these materials. This provided the platform from which I began my online store and continue to grow it.
You are likely not interested in Magento certifications and that’s fine. You are interested in growing your store. I want to share my most recent findings with you.
Here’s the deal. Let’s say your boss tells you that you need to get Magento certified. Of course, the first thing you do is to go to Google and type in “how to prepare for this test”. You land on our website. Who is SwiftOtter? Why would you want to buy from them? What really is this? You rightly have a lot of questions.
What if I told you that I will keep your money only if you pass the test? Now that’s a guarantee.
I’ll turn it around to you later in this show, but here’s the first question that is on your mind: “how much money will I lose when everyone returns everything they ordered? That could entirely shut down my business!”
Yes, done incorrectly, it could. But this is my story of how this has actually helped me, and I have numbers to prove it. Will this revolutionize your business? Maybe. I will share my story and tell you how you can know for yourself.
I have experimented with two offers. I started from the beginning with a pass guarantee: you pass the test or I will return the money you paid me. Yet, until recently, I never tested to see if and how much this actually improved sales.
Let’s start by seeing how much a pass guarantee helps:
Bounce rate is 5% lower.Conversion rate is up 25%.Revenue is up 11%.For all age demographics, the conversion rate was improved.
All good numbers, right? And, the guarantee is not prominently posted. It’s part of the description but that’s it.
Why do people like a guarantee? It says a couple of things:
It says that we take our products seriously. Guarantees are tough as they most often rely on the end user’s performance: will they actually follow the instructions? Will they be reasonable? If our products are really bad, we would lose a lot of money and either drop the guarantee OR fix them up. In other words, we are putting teeth behind our value proposition.It eliminates (or reduces) the customer’s risk. They know that if this product does not perform as expected, then they will have recourse. In my case, I hope they are motivated to use the product as expected, otherwise, they are still out the test money (which ranges from $200 to $300).
My customers know that I say something, but if the product doesn’t live up to expectations, then they have recourse. They can go write a bad review, but we all would much rather our customers email us so we can resolve the problem.
We had one particular test that seemed to get more failures than the others. I took the time to review the practice test and found some areas we could beef up. That helped.
Again, I view a guarantee as a shortcut to customer feedback. It really helps.
How much has this cost me?
Retail returns are often 10%. My returns are significantly less than that. Yet, they still do exist.
I get very valuable feedback from each fail.
Because I ask for a couple of things as part of the guarantee: first is their test scores. This allows me to see how they did when taking a practice test and compare it against the real test scores. For example, if they get a 50% on the practice test, what is their score on the real test? The wider the gap, the more I know I need to work on.
Second is if they feel any area of the practice test or study materials is deficient. Then, I take that information and do my best to strengthen those areas of study.
I track every pass and fail in a Google Sheet. I see for each certification how we are doing, and thus, where I need to improve.
Yes, a guarantee does cost me some of my revenue, but the value I gain by this immediate feedback has to be worth way more than any revenue lost.
How I reduce this number.
So, what am I doing to reduce my number of returns? Of course, as I find deficiencies, I fix them. Besides that, there is something very important: education.
If someone literally buys the materials for a test they should never take, they are most likely to fail. And the more people do that, the more failures I get. And I don’t want that.
So, in the past couple of months, I have begun a serious education campaign. I’m building out my YouTube and LinkedIn presence with solid and helpful information on how to pass each certification, what kinds of questions are on the test, etc. All of this is freely available.
The big benefit I’ve recently come across is in interacting with people. They have a question, and I can answer it AND also redirect them to a video to provide way more context for this discussion.
The other thing I am doing is that we wrote an email. People would take the practice tests 50 or even more times and then fail. The email suggests that people spend time learning instead of memorizing information because that’s a key part to passing a Magento certification. The number of guarantee invocations plummeted. Again, I don’t have a specific number of this, but we visually saw that it helped.
What type of guarantee do we use?
In-context guarantees
The first is what I have already described as a pass guarantee. If you don’t pass the test, email us for a full refund of what you paid to us. This will typically be anywhere from $15 to $200. This guarantee is directly associated with what they want to achieve. The great part about this is that this is the full information loop that I appreciate most: pass or fail, I work to understand how I can improve—and we certainly have improved.
I think of the pass guarantee as more of an in-context type of guarantee. This directly pertains to what a user would like to achieve as a result. A over-the-top example would be “you buy this pair of running shoes and we guarantee you will achieve a sub-eight minute mile OR YOUR MONEY BACK.” A more realistic example is “you get this shirt wet and it will dry in 30 minutes OR YOUR MONEY BACK.” Maybe “you buy this software product and it will save you 15 minutes every day OR YOUR MONEY BACK.”
This type of guarantee must be quantifiable. This is the benefit you will see as a result of this purchase.
Personally, I see this type of guarantee best fitting products where there is a set and desired outcome.
Blanket guarantees
The second is a 14-day satisfaction guarantee. This is a blanket guarantee. If, for any reason, you don’t like this product, you can get your money back. We most often see this on products where you can’t achieve an outcome. Or, the outcome is often outside of arm’s reach.
I see this frequently on ebooks or courses or online tutorials. It’s pretty hard to guarantee that someone will become a proficient painter, or even that someone can complete the projects outlined in said tutorial.
However, what you want is for your user to see progress. That means satisfaction. So they are satisfied. But if they don’t see progress, or don’t feel like they want to proceed with this venue of training, then they can get their money back.
This also comes in the form of “Free returns”. Many brands, like Zappos, Casper and Reebok offer this. Yet, the expense of return shipping is great—especially as people buy multiple sizes to bring the physical store to their home. I get that there is expense and challenges. What I want to do is provoke you to think through what you can try to see if the impact to your sales is worth the impact (if any) to your bottom line.
Could I challenge you to think instead of “I can’t” to “how can I make this work?”
How do we display the guarantee on the website?
Now that we have what type of guarantee nailed down, the next question is where and how we display this.
I haven’t placed guarantee statements on my home or category pages. The reason is I want to help the visitor get to where they want to get and THEN give them additional information. Depending on your guarantee, you might want to put it on the category page. The way you would know is by experimentation—though, I’m guessing you won’t notice a large difference by placing this on the home page.
I have displayed my guarantees in two ways. First, by embedding it into the text and secondly by calling major attention to it in a callout on the side bar.
For starting out, especially if you are concerned as to how this will work, put it into product details. Don’t hide it, but don’t make it the most prominent thing on your product page.
Run a Google Optimize experiment. First, watch how this affects your revenue, transaction and bounce rate. Are you seeing positive trends on these metrics?
You will probably next ask how you will know the customers that saw the guarantee. Good question. The easiest is to not care. When someone calls you asking you to make good on the guarantee, ask them how they can improve, write it down and track it, then make good. If you need to know, you will likely need to get your developer to make a customization to the order process. There isn’t a way out of the box in Magento to do this.
Once you are comfortable with how things are going with your minimally-published guarantee, step it up! Make every single visitor know what you are offering. Now, how does that look and work?
I tested that. I saw a large increase in revenue when I made my guarantee bold and up-front. The bounce rate also decreased a little, but not by much. People saw a guarantee either way, but they also saw that I was really serious about it too.
One other thing: many websites post a 100% satisfaction guarantee, but they don’t say how they will make good on it or what this entails (or if they do, it’s really not a guarantee so they can keep their rears well covered).
Let’s make this practical.
Now that we are getting ready to wrap this episode up, let’s make this practical for you.
What things should we consider when building this guarantee?
Most importantly is to look at the worst case scenario. What is your current return rate? What would happen if you doubled that? What increase in sales would it take to justify this? Unless you are Hoover in 1992, or you sell really bad products, you are unlikely to hit your worst-case scenario. In fact, you can probably safely halve your worst-case scenario and that is still likely too high.
Remember, every customer that makes good on your guarantee tells you something. This is the most incredible and ideal venue for you to get valuable information on how to improve your offering—and by doing so, you will make your existing customers happier AND your new customers more likely to stay on board.
If you sell physical products, what shipping concerns must you account for?
This is the most difficult sticking point. If you sell physical products, customer will expect free returns, too. A return shipment can be $10-15 and completely wipe out your profit for not this order, but another order as you just returned your customer’s money. This is a numbers game as the goal is that more people will buy as a result.
If you are in the United States, you will also want to exclude Hawaii and Alaska from this guarantee.
Do you have an avenue to improve the products that you sell?
Whether you are a marketplace or a creator, a guarantee done right can be very powerful.
Bed Bath and Beyond was a great example of a marketplace. Unfortunately, the retailpocalypse is hitting them too. Their return policy and guarantee was unmatched in the entire retail industry and was a massive reason why I used to shop there frequently. I knew they only sold products they stood behind. If you run a marketplace, what would set you apart from Amazon? Could it be the curated products you sell?
However, if you are a content creator, like me, you have an immediate avenue to improving your product offering. So, do it! Make sure that you do improve your products.
Do you have a time limit or other limitations on the guarantee?
Evaluate policies to make this financially prudent. At least on paper, you do not want to have an indefinite liability to your customers. Start small and work to a longer time limit as you get a feeling for how this works. In addition, nothing states that you must exactly hold to your policies. If you need to, give some extra leeway to a customer—and you will be sure to delight them.
The big takeaway here is: what teeth can you put into your value proposition so the customer knows you really are serious about what you offer?
If you don’t have any type of guarantee, I suggest being creative to see what would work for your store. Guarantees by no means are one-size-fits-all. Instead, you need to implement what is viable for you.
Finally, start small AND test. If you don’t test it, you will have no idea as to whether or not this has helped. Through the test, meticulously track those who take you up on the guarantee and WHY. This will help you understand where and how you need to improve.
Thanks for listening!
The post Episode #4: “How Guarantees Can Revolutionize Sales” appeared first on Actionable Insights.
