Reduce the risk, not your price
In a business world where so many drop their price at the drop of a hat and then complain that margins are tight and it’s hard to make a profit, I find it strange that so few businesses give the consumer what they REALLY want when they ask for a price reduction, which is RISK reduction.
The money-back guarantee, which is offered by EVERY business in this country (because if I’m not happy I’ll take you to the Department of Fair Trading and I’ll win because the system is in all favour of the consumer) remains the ‘forgotten value add’, yet one that is remarkably lucrative and at the same time very inexpensive to implement (unless you give terrible service and disappoint your customers on a regular basis).
Why is this so? Simple. Because most businesses look at the downside of the guarantee, not the upside.
The downside of the guarantee is ‘the ratbags are going to get us’ and that is true, a very small number of people are going to exploit your money back guarantee. But guess what? The ratbags get you any way, whether you offer the guarantee or not!
What about the upside of the 99+ per cent of people who are impressed by the money-back guarantee and NEVER TAKE UP THE OFFER? Presumably because the product or service lives up to expectations. Sadly, in this country we market at the people who are out to rip us off instead of the people who are putting money in our pockets and that’s just DUMB!
You want real world examples? I have plenty.
I was working in the nursery industry and one of the franchise owners had the misfortune of a chain store opening up right next door. He couldn’t compete on price (he was 30 per cent more expensive) and he didn’t want to.
So what he did was he put up a big sign as an anti-opening sale that said, “We offer a 12 months unconditional money-back guarantee. If you buy a plant form us and it dies within 12 months, whether you kill it or the plant is faulty, bring it back and we will give you your money back or replace the plant free of charge”.
The franchise owner was really happy with how his sales went during the opening sale of his competitor that at the end of that six-week trial period for the guarantee sign, he decided not to take it down and he left it up forevermore.
Now, here’s the point. After having the sign up for 12 months he analysed his business and he didn’t have to give any more refunds in the course of the year he had the sign up than he did in the course of the previous year when he didn’t have the sign up – yet his business improved significantly.
Why? I’ve always said that business is about understanding human nature not tricky marketing – and human nature says that the value is in the offer, not the delivery.
How many people do you know that are going to turn up seven months later with a dead plant demanding their money back?
Very, very few, if any. That’s how many!
How do they sell puppies to children? You go to the pet shop or markets and your kid falls in love with a little dog. Now, if the pet shop owner has any brains he says, “Your child obviously loves that puppy. Pay for it and take it home and if you’re not happy bring it back on Monday and we’ll refund your money and put it to death in front of your children” (that’s just a joke by the way, I don’t advocate euthanasia as a marketing strategy).
Still, very, very few people bring the puppy back. They just want the reassurance that they can.
But the greatest suckers on earth when it comes to guarantees are golfers (myself included). You don’t believe me that golfers are the greatest suckers on earth, read a golf magazine. There are ads in golf magazines that say “If you don’t get a birdie on the first hole with this magic new golf club, we will refund your money” and these ridiculous ads work on us idiot golfers.
Why? Because the golf equipment companies know they are not selling golf equipment. They are selling HOPE TO THE INEPT! And people will pay a lot more for hope than they will for a golf club.
Let me share a personally humiliating true story that reinforces this point.
Many years ago my golf pro had a $500 driver in the window (that used to be a lot of money to pay for a driver). I was hitting the ball pretty badly but I said to the pro “I’m not paying $500 for a driver”. He replied that he had a trial club that I could have a hit with for 18 holes and if I didn’t like it I could return it and give someone else a go.
As luck would have it I hit it really well and at the halfway break in my round I went into the pro shop and said “I’ll buy it”.
The pro was walking out the back and I said “where are you going?” The pro said “I’m getting you a brand new one” I said “I don’t want a new one. This one works” (any golfer will tell you that’s normal behaviour). In fact, I’m not suggesting I am paranoid but I left the words TRIAL CLUB on it for two and a half years because while the thing thinks it’s a trial club, it knows as soon as it stops working it’s going back into the pro shop!
Now, the point I’m making is that the pro could have taken 20 per cent off the price and I wouldn’t have bought the club but by giving me a free trial or unconditional money back guarantee I am very happy to pay full price once the product has demonstrated value.
Surely, this can apply to your business.
Martin Grunstein’s work with over 500 Australian companies across over 100 industries have made him this country’s most in-demand speaker on outstanding customer service. He is contactable by phone on (02) 96623322 begin_of_the_skype_highlighting (02) 96623322 end_of_the_skype_highlighting or by email at email@example.com
Published: Friday, June 08, 2012blog comments powered by Disqus