The Impact of Money-Back Guarantees on Sales Success

The Three Sales-Destroying Mistakes

From a consumer's perspective, let's examine three common mistakes that can deter potential customers before we delve into the legal aspects:

Mistake #1: Hiding Important Clauses

Be cautious about the terms you place in parentheses or bury within the text. Even seemingly harmless clauses can give your prospect a sense of underlying deceit. For example, a guarantee that requires the return of a product in its original packaging, unopened, and in resalable condition, all in parentheses, can seem like a hassle rather than a straightforward process. Be transparent about your guarantee terms to avoid disputes over refunds and returns later.

Mistake #2: Providing the Minimum Guarantee Period

A 30-day guarantee seems to be the industry standard, although shorter periods are not unheard of. Offering a brief guarantee period can make customers feel that you're worried they'll discover your product's lack of value given enough time. Moreover, some customers may purchase immediately but not use the product until after the guarantee period due to time constraints or to avoid a potential price increase. Therefore, it's essential to accommodate impulse shoppers and not deter them with a restrictive guarantee.

Mistake #3: Including Vague Clauses in Your Guarantee

Avoid ambiguous clauses in your guarantee that can confuse or mislead customers. Business owners often get so engrossed in protecting themselves in their guarantees that they overlook the clarity of their message. Instead, focus on what you can guarantee and eliminate any dubious clauses that could harm your credibility.

Understanding the Legalities

In the U.S., there are specific requirements when offering guarantees (referred to as "warranties") on consumer products. These apply to consumer products, not commercial ones, and pertain to written warranties. Warranties are your promise as a merchant to stand behind your product. The law recognizes two types of warranties: implied and express.

• Implied warranties include the warranty of "merchantability," which is a promise that the goods sold will function as expected and that there is nothing significantly wrong with them. The implied warranty of "fitness for a particular purpose" is a promise you make when your customer relies on your advice that a product can be used for a specific purpose.
• Express warranties are voluntary promises about your product or your commitment to remedy defects and malfunctions that some customers may experience.

For more information and examples of these terms, see The Federal Trade Commission's (FTC's) "Understanding Warranties" article.

The FTC applies specific requirements to businesses that choose to offer a written warranty. For instance, written warranties on consumer products costing more than $15 must be available to consumers before they buy. For more details, see the FTC's Rule on Pre-Sale Availability of Written Warranty Terms.

There are no time limitations on implied warranties, but the state statutes of limitations for breach of either an express or implied warranty are generally four years from the date of purchase. This means that buyers have four years to discover and seek a remedy for problems that were present in the product at the time it was sold.

If you choose not to offer a written warranty, most states allow you to avoid an implied warranty for that product. However, you must clearly inform your customers in writing that you won't be responsible if the product malfunctions or is defective.

Conclusion

Creating a money-back guarantee involves more considerations than you might initially think. By offering an ethical, easy-to-understand, and law-abiding guarantee, you can significantly boost your sales.