Effectiveness of Guarantees?

[AOCenteno]

Does anyone have experiences with using effective guarantees (say from 100% to 200% guarantees) to create sales volume and/or trust? Bad and Good experiences are encouraged to reply.

[Librazoe1982]

When I was into search engine positioning, we offered guarantees for our work. It was effective but the down side is, people will purposely search hard to find reason to disatisified leaving you no choice but to return their money. People can be mean sometimes. However, we did get alot of referrals from other people who were satisfied.

[Dale King]

Does anyone have experiences with using effective guarantees (say from 100% to 200% guarantees) to create sales volume and/or trust? Bad and Good experiences are encouraged to reply.

A solid guarantee can be very effective in increasing sales and/or conversion ratios. Why? Because guarantees reassure the customer. Based on my own personal research, the longer the guarantee the more effective. For example, I guarantee my consulting services for a whole year while most of my competitors guarantee their services for 30, 60 or 90 days.

That being said, you should only do that if you have a quality product or service that you have supreme confidence in. And that you know people are going to be satisfied with. For example, I average only one or two refund requests per year, so I have a high satisfaction ratio.

Also, watch the hype. It's not necessary to say you guarantee your product 200%. 100% works just as well, and doesn't sound like hype.

Dale King

[remipub]

Also, watch the hype. It's not necessary to say you guarantee your product 200%. 100% works just as well, and doesn't sound like hype.

Exactly! What the heck is a 200% guarantee anyway?? Sure there are those "we'll double your money back if not satisfied" but it drives me nuts when people generically say "110% guaranteed" It means nothing and detracts from the credibility of the sales message - at least to me.

The effectiveness of a guarnantee will also depend on the product or service. For someone selling toothpicks (random example) it means less than someone selling a smoking cessation program.

[Fanatik]

Perfect negative example here:

When I started my HID business, I bought the kits from a supplier in California. I did some research on them, and the business was reputable, so I became a buyer. Great price (only $73 per kit -- and I was reselling for $149.99!) and decent customer service - at first.

My gaurantee was for, "Try them for 30 days. If you dont like them - return them for a full refund and WE pay shipping!"

Uh oh. I had a fairly high failure rate on those kits!! So I ended up paying about $120-180 out of pocket for some kits to be returned. I was pissed - but I burned myself.

I switched suppliers and went with one in the southern states... He was AWESOME! His kits NEVER had to be returned (which is great, because HIDs should never fail anyway!) and I could contact him or his business partner on their cell phones if I needed anything. I still offered the same gauruntee, but I had higher confidence in my product.

NO OTHER HID RETAILER offered that same gauruntee! NO ONE. So, I dropped the advertisement for a week and sales declined by 12%. Advertised it the week later and they increased 18% (6 percent more than it dropped, lol).

So yes, I think it makes a difference - but make sure you can back it up!!!

J

[AOCenteno]

Thanks everyone, especially Fanatik here. Great example! Here is some more info about my situation:

Background Info:
My product is custom-made clothing that requires the customer to design the garment along with enter their measurements. I am focused on the US right now, and brought up the guarantee question because I want to create a risk free environment for my customers.

The Problem:
The business model is new here in the US, and many people find it hard to believe you can get such a great fit/well made garment with you taking your own measurements. People are just hesitant to try.

Possible Solution:
Offer a 110% guarantee (vs our current 100%) - the extra 10% for their time if it goes bad. The studies I have read show that guarantees are rarely acted upon by consumer; in any case we make damn good clothing with most customers 96% completely satisfied by the original product received. The remaining 4% percent we either pay for alterations or rebuild the garment.

My Question to You all
I want to hear more experiences like Fanatik's below, especially if you notice a pick-up in sales/drop off when you add or drop the guarantee. In "The Four Hour Work Week", Tim Ferris talks about a 200% guarantee....so that's where it came from......I think its extreme, but I would like to hear real world experiences with the different types of guarantee out there. I really like the idea of a 100% plus paying for all the shipping fees.

Perfect negative example here:

When I started my HID business, I bought the kits from a supplier in California. I did some research on them, and the business was reputable, so I became a buyer. Great price (only $73 per kit -- and I was reselling for $149.99!) and decent customer service - at first.

My gaurantee was for, "Try them for 30 days. If you dont like them - return them for a full refund and WE pay shipping!"

Uh oh. I had a fairly high failure rate on those kits!! So I ended up paying about $120-180 out of pocket for some kits to be returned. I was pissed - but I burned myself.

I switched suppliers and went with one in the southern states... He was AWESOME! His kits NEVER had to be returned (which is great, because HIDs should never fail anyway!) and I could contact him or his business partner on their cell phones if I needed anything. I still offered the same gauruntee, but I had higher confidence in my product.

NO OTHER HID RETAILER offered that same gauruntee! NO ONE. So, I dropped the advertisement for a week and sales declined by 12%. Advertised it the week later and they increased 18% (6 percent more than it dropped, lol).

So yes, I think it makes a difference - but make sure you can back it up!!!

J

[akula]

Does anyone have experiences with using effective guarantees (say from 100% to 200% guarantees).

have been in business about a decade. no, i have not had any good experiences with guarantees, expect for when i'm screwing the guy who is offering them.

giving a free indemnity to customers is gonna blow ur costs out. it's cheaper and more effective to find another differentiator, because indemnifying customers sends out the msg that ur inventory is shithouse.

when i was selling software about 6 years ago, we used to offer a 100% money back guarantee, but it didn't make nearly as much positive impact on profit as the decisions we made in correctly choosing distribution chanels

the point: u have the 4 p's. the pricing (i.e. the guarantees), are a much weaker basis for building a competitive advantage than the other 3 p's (because competitors can always get into a price war and offer the same guarantees as you do, but they don't, which is why they're successful, and you're a startup).

[chrispalko]

Essentially, a guarantee is just a way to remove the risk from buying a product. There are other ways to remove or reduce the risk (from a consumers point of view) and still keep your costs down.

Whoever said that guarantees causes people to try harder to find something wrong is right. They will. You would, you know?

In my line of work (web/graphic design), I offer a "You don't pay unless you're happy" kind of deal. However, during the process, there are "milestones" that require payment to continue, so I'm getting my money and the work continues. However, if they decide to terminate the assignment because they are not satisfied, I keep whatever payments have already been made because they have signed off on their approval of my work thus far. Get it?

This method may not work in your situation, but just try to think of other ways to attract buyers and show them less risk in purchasing your product, all while keeping your costs down.