Compass Designs .net

Many readers of this blog are one of two types of business, customization/design of Joomla websites or downloadable digital products. Prompted by a chat among some of my colleagues, I'd thought I'd see what people think about an important part an online business - your refund policy.

Why do you need a refund policy?

To Protect Yourself and your Customers

If you don't have one yet, you should stop reading and draft one right now. While you are working on it, you really should have some terms and conditions. Its very important for an online business to clearly communication the expectations of how they will do business with people. Because you are usually unable to meet face to face with your customers/clients, you need to work harder to get this information across up front.

I very often see designer/service provider websites that don't have this information. Perhaps more used to seeing traditional terms and conditions, they don't feel that they need this. My instinct is that important information like how much deposit is needed, brief details of your work process, and the all important invoice terms (net 30 days? 60? interest on late payment?) are very useful in getting questions sorted out before the potential customer even contacts you. My pet peeve are those one page designer sites with just an email, but hey, maybe they don't need the business.

If you offer digital products then the need for terms is even more important. Offering digital products and collecting money online means you need to protect both yourself and your customers. IANAL, but I think that key parts that need to be included are your:

• License
• Ownership
• Return/refund policy
• Jurisdiction

The last one is often overlooked, but pretty important. It defines in what court disputes will be handled in that event. Obviously you want that to happen locally to you where your legal help is, not halfway across the world.

Why do you need a refund policy?

To increase your conversion rate

Whaa? Having a customer-friendly refund policy leads to a higher conversion rate?

Yup, who would have thought....

There are two reasons for this.

1. When people come to your site, they will make a very quick decision about how credible you are. That credibility will be a huge factor in determining whether they have the confidence to buy from you. Things like how transparent it is who you are (company information), terms and conditions (how thorough you are) and the professionalism of your design all contribute to this decision. A great list of easy steps you can take can be found on the wiki page about a Stanford study on credibility.
   
   
2. Secondly, and perhaps more important, your refund policy is an important factor in the risk your customer perceives of their impending (hopefully) purchase. The more you can reduce their perceived risk, the greater the chance of them buying. This is sometimes call Risk Reversal and the great Mindvalley Labs guys have an excellent explanation of it on their blog. They actually offer a double money back guarantee on a product priced over $1000!

Its been proven many times that if you offer a great refund policy, your sales/conversion will improve by a bigger factor than the amount of refunds you might have to give out. Zappos anyone?

What Refund Policies are People Using?

So we have seen its very good to have a policy, but what examples are there in Joomla-land? Here are a few examples from some major companies, directly quoted from their sites:

• Joomlashack
  "Since our company is offering non-tangible irrevocable goods we do not issue refunds after the product is shipped, which you are responsible for understanding upon purchasing. Please make sure that you've carefully read all relevant documentation and tried out the demo. We only make exceptions with this rule when the product appears to be not-as-described on a case by case basis in agreement of the parties concerned. The deadline for any refund claim is one week after the delivery date."
• iJoomla
  "Buy our Joomla Extensions with the comfort of knowing that your order is backed by a 100% Money Back Guarantee. This 30-Day Guarantee gives you plenty of time to try your new extension and see if it fits your needs. If for any reason you need to cancel your order, just contact us and you're done! Note: we don't give refunds for whole packages. If you are unhappy with ONE of the package products, we can give you a refund for this product minus the discount."
• Azrul
  [I can't find an obvious link to Azrul's terms, but there is a large button describing a 30 day, 100% money back guarantee]
• Phil-Taylor
  [Difficult to find] "All our sales are final and no refunds will be given. As all of our products are digital software, delivered instantly once payment is received it is impossible for you to return a product to use for a refund. If you find a bug in our software, you can report it in the bug tracker and we will fix it in the next version. Finding a bug is not a reason to request a refund. However, we understand that it is impossible for us to test our software on every platform and every configuration it may encounter on other servers. Therefore if you are unable to get our software up and running on your server in the first 30 days after purchasing the software then please contact us and we will do everything within our knowledge and experience to get our software to work on your server."

What about your refund policy?

A couple of last things to consider when deciding your refund policy. Firstly, if you have a hard-nosed policy, that tends to create an impression of what kind of business you are. Obviously, you want a positive customer experience so they will tell people how great you were... word of mouth marketing. Secondly, if you are not willing to offer a easy refund, how much does this really cost. Chances are you will frequently get involved in back and forth emails which take time. How much was that time worth, and would it have cost less to simply issue the refund?

Have you got a refund strategy you would like to share as a business? Or perhaps you have seen a great on being offered. What's your thoughts on refunds?