November 27, 2005

Where do you get the nerve...

"...to offer a really good guarantee?

"And I'm not talking about just a 30 to 90 day guarantee or even one that lasts 6 months to a year.

"I mean one where you buy it, use it, and if you don't see any results within 1 year, I'll refund your money AND pay you $1,000 out of my pocket for the time you wasted."

This was a question I came across as I surfed the Net, and thought of sharing some of my thoughts about it.

As part of my mentorship program with Jay Abraham, one of the most valuable things I learned was about risk reversal (a.k.a guarantees).

Jay shared many things, but relevant to this question, here are 2 things:

1. Know your numbers. Refund rate, conversion of visitors to sales, satisfied clients, repeat clients.

Based on this, figure out what would happen if your sales doubled, and your refunds doubled too (or even tripled).

Say you sell a $50 profit product, and your refund rate is 5% (it should be lower, but let's say it's 5%). For every 5,000 visitors, if you sell 100 copies, your profit is $5,000. 5 refunds will cost you $250, leaving you with $4,750 in net profits.

If your conversion rate DOUBLES with a rock solid guarantee, your profit will become $10,000 (200 sales). If your refund rate doubles too, 20 will refund - and you'll lose $1,000 leaving you with a profit of $9,000.

Looks better, doesn't it? Even with tripling your refund rate, or quadrupling it, you get higher profits - plus you get more customers you can offer other products to.

2. Denominate your guarantee. Make it conditional upon the buyer doing something - trying out the software for X days, reading the book and acting on one of the ideas, setting up a website and promoting it using X tactics etc.

Specify what results they can expect, within what time frame, and then make your guarantee big enough to repay them for their time and cost investment in trying out your product.

These are the 2 biggies. You can see an example of the denominated guarantee on this website:

http://www.SmartNicheMinisites.com

I have also toyed with the idea of 'copying the gurus' when I first started - and was lucky I didn't get burned. Without this knowledge, it would have been an expensive mistake

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