Should we offer money back Guarantee? Are payment processors fine with that?

We train people on various software through pre-recorded videos and have been contemplating offering a money back guarantee - just to reinforce that we are confident and stand behind our product.

We get individuals and corporate as our clients. We think our guarantee could be abused by individuals, so as of now we want to start with corporates (- given that they enroll at least 3 students for a particular course. )

Q1 - What do you think, should we go ahead, do you have any do's and dont's for us?

We use PayPal as our payment processor,

Q2 - how well you think it will go down with PayPal in case we start getting lots of refund requests?

(We have a good standing with them as of now and are on their preferred merchant rates plan.)

If you take credit cards for payment, you are effectively forced to offer refunds by the US Consumer Protection Act. It doesn't matter what country you live in (although most developed nations have similar laws). In the US, a credit card holder only needs to write a formal complain (typically they call their credit card account and complain, then sign a form sent to them) and you will be forced to refund their money.

The exact rules governing this are explained in US Federal Law, but unimportant- if the consumer wants to complain they can force a refund, except in very specialized situations. And note Paypal is notorious for bending over backward to protect the consumer.

So the whole point of this conversation is this- since Federal Laws effectively grant anyone at least 60 day refund period, why not turn this negative into a positive? Advertise that you offer 30 or a 60 day guarantee. You are already forced to do so if you take payment by credit card, so make it sound like you are offering something to your customers.

Your question seems to be only "Does processing refunds harm your status as a merchant processor when using Paypal?"

The answer is no. Chargebacks are what harm your status as a processor and these are when the customer forces a refund on you, not when you supply a refund to the customer. However Paypal is notorious for being overly cautious when it comes to fraud and a HIGH number of refunds to charges could set off their fraud detector and have your account locked. I suspect your refund rate will still be very low compared to how many people purchase your product.

As an example, the Stack Overflow Careers site offers a 90 day money back guarantee for any reason and our return rate is rather low.

I do believe this is a bad idea. Money back guarantee is usually given for more tangible items. If you aren't happy with the product, return it where returning it means "I can't use it anymore" for the client. But this is training, transfer of knowledge and nothing would stop a person from being "trained", and then returning what? new knowledge stored in his brain? medical science is still out on that...

I understand your need to prove your products' quality without risk to the client. If I were you I'd offer free sample training. Pick one subject and offer the training video free for anyone who registers. That should be enough for clients to decide whether your products meets their quality requirements.

We offer a 120-day money back guarantee and we provide it to everyone and make it obvious for everyone to see - we rarely ever have customers asking for a refund. We never had any issues with our payment processor and as Michael mentioned - it's chargebacks that would be an issue.

A money back guarantee is a way of getting more sales due to the risk-free purchase. If you really believe in your product I suggest doing it. If the money back guarantee increases your business by 100% and you get a 1% (should be less) asking for a refund then you're better of anyway.

There WILL be those that abuse it - but that's ok as on the whole you should be better off.

I believe the absolute majority of people (customers) are genuine and if they did get their value then they would be happy paying for it.

I would agree with a lot of the comments mentioned about different customer terms for different types of customers, the challenge of

Documented Need If I read into your question a little bit -- I believe there is a marketing goal of communicating your confidence in your quality product and to remove a barrier to closing large accounts. (Perhaps an opportunity for a little differentiation as well? ) I think that this is a worthy marketing goal -- especially if it is backed up by real field data that prospective clients ask about the guarantees, and sales reports back that competitors are luring customers away by offering great guarantees.

Stand by Satisfaction I would propose rather than stand behind the technical product -- stand behind customer satisfaction. Guarantee that the customer will be satisfied. Communicate a 100% Customer Satisfaction Gauranteed. Then you can frame the scope -- were you satisfied with the training that was delivered? I am sure this question is already part of your standard customer followup within your CRM process anyway. :) Focus on resolution not on rebates The focus should be on satisfaction. Before refunding the money-- strive to satisfy the customer. There will be a few that are so mad at what they got that they can not be satisfied-- but the majority will give you a second chance to do what it takes to make them satisfied.

Have a Clear Policy Build into the policy how they alert you that there is a problem -- and that they have give you a reasonable chance to earn their satisfaction. Make it clear what the refund includes and what it doesn't. Make it a process so that scammers can't just call and say -- "I am not satisfied, can I have my money back?" Paying a lawyer $300 to do it will pay off in the long run. (I can't believe I just advocated paying a lawyer )

Now Market it And then, back to your goal -- market it. Put it on your website. Put it on your promotional material. Integrate it to your sales pitches. Get a testimonial from a current customer that says "The satisfaction guarantee gave us the confidence to sign up and we are glad we did. . . " or something like that. Put out a press release announcing the strongest guaranteeing in the business. Post a YouTube video with a "reporter" interviewing you on why you are so confident in the product that you can offer a guarantee in an industry so plagued by dissatisfaction.

Have fun!

I think a money back guarantee is worth trying, both for corporate and individuals. My own feeling, and experience is a very small percentage will try to get one over. Certainly when I was offering an unconditional money back offer the rate of uptake was far lower than I had worried about, but for potential new customers it takes away another resistance to buy - would that outweigh a small percentage abusing?

Q1 - What do you think, should we go ahead, do you have any do's and dont's for us?

Depending on how you're selling your training - open access for monthly charge, or cost per video or course you might want to offer a refund or free other course/video.

Obviously you'd want some sensible constraints on refunds such as 14 days, or most recent purchased video/course only, as suits your model.

The thing with training is it's somewhat intangible "Learn Java in 24 hours" is rather unrealistic, despite many books in that vein, so long as expectations are set reasonably beforehand.

Why not trial it, perhaps on a new course, and see how it affects you?

Q2 - how well you think it will go down with PayPal in case we start getting lots of refund requests?

Even if you're issuing refunds it shouldn't be a problem with paypal as it's a transaction to them, rather than a card chargeback. It's a chargeback that would cause you problems.