Should you offer a product guarantee?

Dice on a table with 100% service, 100% quality, 100% efficiency and 100% reliabilityWhen a potential customer considers purchasing from your business, are there a number of risks to completing the purchase? Will the product or service solve the problem they have? Will it meet the needs or wants of the customer? Will the benefits outweigh the costs? A guarantee can help remove a customer's reservations

Customers are already protected by a number of unfair trading restrictions and rules prohibiting unfair marketing practices. But by offering a guarantee that goes above and beyond those minimum protections, you further remove the risks to potential purchasers and make it easier for them to buy from you.

This, in turn, should mean more of your potential customers will convert to actual customers and make the purchase. This is a good thing.

Here are five tips to developing a great guarantee:

1 Position your guarantee clearly and boldly to potential customers

The worst guarantee is one that customers don’t know about. This may sound ridiculous, but as a small-business advisor I often discover businesses that have a guarantee but don’t tell their customers about it at the time of purchase. This means the guarantee was not needed for the purchase. Some of those who didn’t buy might have thought it was too risky to make the purchase without a guarantee – even though they would have got one.

2 The stronger and bolder the guarantee – the better

A watered-down guarantee doesn’t work. Make it big and bold. The idea is to get more customers to buy confidently, so big and bold gets more attention in the marketplace. I often see big resistance to make it bold. This is typically because of the fear the market will take advantage of your guarantee. The reality is that a very small percentage probably will, but the percentage is typically less than 1%. The profits from the other 99% of new customers will more than cover the cost of dealing with the unsatisfied 1%.

3 Be specific how you define the “claim”

As the business developing the guarantee, you get to determine the rules for a claim. While the guarantee needs to have some meat and be easy to use, you control the details. Make it ‘if this, then that’. For example, ‘If this tree doesn’t live for one year from purchase for any reason, we will replace it for no charge.’ In this example, the claim was not cash but a free replacement, which costs less to the business than a full refund.

4 Test your guarantee first

If you are worried about how the guarantee will work, or that customers will abuse it, test it in a controlled manner. You can offer the guarantee to a limited group of potential customers or VIP customers to see how it works, then you can tweak it based on how the test works out.

5 Research guarantees in other industries

The design of a great guarantee does not have to come from your industry. There is no need to re-invent the wheel. If you just focus on the current purchase decisions you may be making yourself, you can experience how and if a guarantee affects your decisions when making a purchase and whether you feel it reduces the risks.

Written by Paul D Foster

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