This blog post was written by Scott Flood and originally appeared on the Inside Indiana Business website.
There’s something about guarantees that terrifies the most confident businesspeople. They know their product or service is excellent, and that current customers tend to be overwhelmingly satisfied. But when it comes to backing that confidence with a simple promise, their poise begins to wither.
Usually, that’s because of one of two things. The first is that they really don’t have such a high level of confidence in the quality of their product or service, which means they face a much bigger problem than offering a guarantee.
In my experience, the other reason is far more common. They’re afraid that dishonest people will take unfair advantage of them. They worry that there are people out there who are ready to pick their pockets by making spurious claims. And you know what? They’re right. There are people out there who will play bad games with your warranty.
But you don’t shut down your store because you know that a certain percentage of customers will be shoplifters. You don’t stop hiring employees because a few of them may have light fingers or poor attendance. You accept checks from buyers despite the knowledge that some number of those checks will bounce.
So you treat guarantees the same way you address all those other risks. You mentally prepare yourself for a certain amount of loss, and where appropriate (and legal), you create an allowance for that potential loss on your books and build that allowance into your planning.
Why are guarantees so important? They remove a prospective customer’s final barriers to making a purchase. Usually, by the time the guarantee becomes a consideration, the customer is already convinced that he or she wants to buy what you’re selling. The advertising has caught his or her attention, the sales message or pitch has delivered the details needed to turn a browser into a buyer, and the pricing has nearly sealed the deal.
The customer just needs one more push to get past those nagging little questions. What if I really don’t like it? What if it doesn’t work? What if it doesn’t fit? What if I change my mind? The guarantee steps up to say, “You don’t have to worry about any of those things. We’re so confident that you’ll be satisfied that we’ll give you your money back.”
If you won’t take my word for it, pay attention to the folks in the direct marketing community, who constantly test every possible permutation of offers to determine which one works best. Watch closely, and you’ll see that everything they sell through their channels — from ShamWows to life insurance — carries some sort of reassuring guarantee. They know guarantees work because their testing proves it. (And if they were to let you peer into that data, you’d discover that only a miniscule percentage of buyers ever takes them up on those guarantees.)
Guarantees aren’t just appropriate for as-seen-on-TV gimcracks. The familiar story about a Nordstrom store cheerfully accepting a return of tires it didn’t sell may be apocryphal, but it’s illustrative of the reputation the store has earned for its willingness to back what it sells. If you’ve ever had occasion to return a purchase to that retailer, you know that you were treated just as well as someone who was making a purchase.
Nordstorm acquired that reputation by making their guarantees — and the process for fulfilling them — remarkably simple and transparent. When you buy there, you know that you can return any purchase that falls short of your expectations. And when you return it, you won’t be directed to some dark corner where a scowling clerk awaits. Any associate at any register will handle the process in minutes, smiling and addressing you courteously.
Simple guarantees like that are powerful. That’s something the Trader Joe’s grocery chain understands. Visit one of their stores, and you’ll see this message: “Try it. We think you’ll like it. If you don’t, bring it back for a full refund.” That’s it. No legalese, no weasel wording, no complex return processes, no validation necessary.
That approach is especially important for them, because they offer an array of unique products, some of which may even seem to be a little terrifying at first glance. (“They’ve combined what with what?”) But by offering the guarantee, they make testing something new a risk-free experience. I can offer firsthand proof that it works. Many of the products I buy regularly began as experiments.
Do customers rip them off? I’m sure there is a small percentage that takes unfair advantage of their generous offer (like the restaurant diner who doesn’t bother to complain about his steak until he’s on the last piece), but they recognize that those folks are decidedly in the minority. Meanwhile, increased sales to other customers more than makes up for any losses they suffer.
Of course, some guarantees are nothing more than cheap gimmicks. I recall working with an automotive parts company that promoted a particular line of parts as having a “lifetime warranty.” Consumers would have had far less confidence had they read the internal memo that crossed my desk. That memo spelled out the hoops involved in filing a warranty claim and the number of items the buyer would be expected to retain years after buying and installing the part. Its last line was one of the most cynical statements I’ve seen in a 30-year advertising career: “If the buyer has been crazy enough to go through all that, they’ve earned a free replacement.”
But the vast majority of companies that offer guarantees do so honestly and legitimately. If your organization is among them — or wants to be — I’d recommend that you keep Nordstrom and Trader Joe’s in mind as examples of best practices.
Make your guarantee as simple as can be, and honor it in that same spirit. Then promote it with complete confidence. You’ll discover that customers will take you at your word, and will buy more confidently and eagerly. When you handle the inevitable returns cheerfully, you’ll build repeat business and powerful word-of-mouth (especially in this age of online review sites). And while I can’t guarantee that offering such a guarantee will ensure your success, I can promise that you’ll be far more likely to achieve it with one.
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