More Business Firsts

Processed my first refund today (um, yay?). Can I give a piece of advice for everyone who has a money-back guarantee (which should be everyone): any time your customer asks to invoke the guarantee, process the refund immediately, then write back to your customer.

Minimally, you should thank them for choosing your software then inform them you have refunded their purchase at their request, and sign off gracefully. If you feel the need to ask why, you can then ask why, but phrase it in such a way as it sounds like a favor to you rather than a business request. People will generally respond pretty favorably to requests for a 10 second favor after you’ve just given them money.

I learned this lesson through my first real employment, which was as an order entry operator at Quill Corporation Office Supplies. Quill is outwardly fanatical about customer service: without violating any confidences regarding their internal guidelines, suffice it to say they would rather have some customers get away with murder than inconvinience another customer to the tune of 5 bucks. I have seen their customer satisfaction metrics and the comparison to other companies in the industry, and the fanaticism works.

You might be inclined to ask why the person is returning the software, and then process the return pending a reasonable explanation. This is a mistake. There is no question that your customer can get money from you: the question is whether they go through you or they chargeback. I can scarcely find words to describe how much better for you it is that they go through you. Well, OK, here’s an attempt: if they go through you, it costs you either “nothing” or “very little” depending on your payment processor, if they chargeback you will frequently get hit with a large fee ($25+) on top of paying your payment processor fees, and frequent chargebacks will get your account yanked.

You might be inclined to write off a customer who has requested a refund. From a support perspective, this is correct. From a politeness perspective, wrong move. You’re not Quill with 6 figures worth of customers, but you are in a niche market, and your niche talks to each other. The next time your ex-customer is chatting with his friend and his friend expresses the same need he had, he will always, invariably, talk about his experience with you. Since he’s your ex-customer, this will not be a maximally positive conversation, but you can choose whether its “Well, I bought from Bingo Card Creator. It didn’t do exactly what I wanted but when I asked for a refund I got it in 10 minutes and I was impressed by his professionalism” or “I bought from those “#$”#%”$#!s at Bingo Card Creator. What a scam. It crashed my computer three times and when I demanded my money back I had to fight him three days for it. Burn in “#$#”$”, “#$”#%”#%”. So, Bob, how are your kids doing?”

Big deal, you think, how many people are going to buy or not buy on the basis of a quick conversation with a co-worker? Answer: this is the most influential form of advertising you will ever get in your life. I remember getting an all-hands memo when Quill gained a $X00,000 a year account because the purchasing officer had a good experience seeking a technically-out-of-bounds accomodation when ordering a single cartridge of toner for his wife. He wanted free shipping on a $Y order. We didn’t offer free shipping until $45. The representative he spoke to said “No problem sir, we’ll make an exception for you. And have a box of Mrs. Fields’ Cookies as our thanks for calling in”. Do you know what a box of Mrs. Fields cookies and eating a shipping charge costs us? Suffice it to say that its more than the amount of profit the company made on a $Y order. Do you know how much profit a $X00,000 account makes in a year? It pays for a whole lot of cookies.

(P.S. If your uISV ever requires office supplies, I heartily recommend my old colleagues at Quill. You will find no better service in the industry than you will get at Quill. If I’m wrong, the cookies are on me.)

Stupidly simple thing to keep in mind as a uISV: always leave enough money in your account to cover the most damaging single return you’re currently liable for. If you have a 100% money-back guarantee policy for 30 days, and you’ve sold $1000 of product in $25 increments, keep minimally $25 in your account. If you’re using Paypal, this will decrease the amount of time it takes to get your refund authorized. Even if you’re not, if you have to do account-balancing tricks to get your customer their refund (in my case, that could possibly require an international wire from Japan to the US, followed by funding my Paypal account and then processing the refund), it will take a while and peeve off your customer. What if two people request refunds? In this case, you’ve probably done something wrong. 🙂

Oh, why offer a refund? In a nutshell, because the marginal number of customers the refund offer will get you outweighs by many orders of magnitude the amount of charges you will eat processing refunds. Steve Pavlina covered this better than I ever could (search for “guarantee”, although the rest of his advice is decent, too).

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7 Comments on “More Business Firsts”

  1. Gill Bates Says:

    I aggree about granting refunds. If you don’t grant a refund, the user can perform a chargeback anyway.

    However, some customers are jerks: I had customers who bought every new product I released, then asked for a refund or performed a chargeback. Of course they did this to keep the product.

    I also found that the registration keys we sent to some of these customers ended up on pirated software sites.

    Anyway, there are few such customers.

    About customer support: I don’t aggree with your opinion. Customer support takes a lot of time.

    When a customer needs a lot of support, I often tell him that it’s obvious that our software is not a good match for him, tell him about a competing product, and refund his money, while allowing him to keep the product. This way he stops bothering me.

    I am very polite and I apologize to the customer but I make it clear that I can’t answer more than 3-4 mails per purchase.

    In the time saved this way, I improve the program, and end up earning more than if I kept the “time sucking black hole” customer’s money.

    Only about 5% of the buyers of the software need support. Treating these 5% extra well will NOT bring you word-of-mouth sales.

    How about treating well the rest of the clients (the 95%)? Write a new program they need, and offer it to them for free. This way you WILL get a lot of good-will towards the company, word-of-mouth sales, etc.

    Your money is not made by support. Your money is made by selling the product.

    For that office supplies company you mention, it’s different because every customer talks to a seller. So 100% of the customers are influenced by how polite and willing to help them the seller is.

    In shareware, only 5% of the customers talk to you. Of course you must NOT piss them off. Treat them well, help them, treat them politely, etc. But you must not waste a lot of time with them, either.

  2. Patrick Says:

    I was going to reply to the above comment but my reply went overlong. So I’ll save it for a blog post. Suffice it to say that I agree in part and disagree (strongly) in part.

  3. Gill Bates Says:

    One more thing: for a product which costs under about $30, I think support should be paid separately. If the customer wants support, he should pay $10 and then he gets support for 5 incidents, or something.

  4. Andy Brice Says:

    I make it part of my terms that I will only issue a refund after:
    -the CD is returned, if they bought one
    -they email me why they didn’t like the product
    -they email me that they have uninstalled the software and won’t it again

    I have had had no problem with this policy so far and it means I am guaranteed useful feedback. I make sure to always be polite and responsive. Thankfully I don’t get many refund requests.


  5. […] MicroISV on a Shoestring – This is a new blog by Patrick McKenzie on lessons learned as he starts his micro-ISV. Pat has a great writing style and as he deals with all the moving parts of this business (today was refunds), he’s providing a great perspective on what works and what doesn’t. Good reading if you’re already running; better reading if you are just realizing what you’ve got yourself into! […]

  6. Frank Reiff Says:

    Well, I’ll do the disagreeing before Patrick gets a chance 🙂

    The 5% of customers that actually talk to you are the most important ones: they tell you what you are doing right and what you are doing wrong and how you are perceived by others (as opposed to what you think you’re doing right/ wrong and how you think you’re coming across).

    This is already invaluable and certainly worth your time. What’s more they talk to other people too and probably more so than the 95% of customers who don’t talk to you.

    You don’t get to choose your customers, they choose you.

    Most of them are great guys and gals, some of them are “alright” and some of them are completely impossible and no matter what you’ll do they’ll continue to insult you, tell everybody they know and everybody on the internet who will listen how bad your product is and what a terrible person you are: “on the internet nobody knows that you are a dog”.

    This tiny minority of 0.1% and the things they put you through are the price you pay for being in business: Don’t let them get to you, give them their refund, be friendly, accept the blame no matter how unreasonable, always stay polite: they’ll soon get tired of having a go at you.

    Also, don’t get involved in a 24 hour email duel: reply quickly to the first few emails until it’s clear that you’ve done everything you can. Then calm down and let them calm down for a half day or so. NEVER write an email while you’re angry. NEVER refuse to reply.

    The best outcome with irritating customers is: They’ve got what they wanted. You are completely blameless.

    As long as all the bad things they say about you are false, there is good chance that people that know them won’t place too much worth on their opinions and that they’ll give themselves away with the way that they tell their falsehoods.

    The days when everything that was written on the internet was taken at face value are long gone.

    Even better, the 5% of customers that have talked to you and to whom you’ve over-delivered might come to your rescue: “Gill Gates was very friendly and polite to me and spent a lot of time helping me sort out {insert problem here}. I can’t believe a word of what {insert name of accuser here} says.”

    Just my 5 cents.


  7. […] I was just reading this post on Patrick’s blog, and it got me to thinking about some great customer service I have received lately. […]


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