Thoughts from OfficeTime: Should Your App Have a Money Back Guarantee?

You’ve worked hard on your app. Should anybody be allowed to simply get a refund even after using it for some time?   What if, even after refunding their money, the person continues to use your app?  What if someone buys your app deliberately intending to get their money back?  Are you going to allow yourself to be ripped off?

Well, the answer is yes, you probably should.

Will people try to take advantage of you? It’s possible.  If you spill your drink at McDonalds, they’ll give you a new one.  If you kill your potted plant and take it back to Hole’s Greenhouse, they’ll give you a new plant.  Will people deliberately spill their drinks and kill their plants just to be refunded?  I’m sure it happens. But not that often.

Studies have shown that a trusted and well presented money back guarantee can actually increase sales by up to 40%. Refunding customers is a marketing cost.  How much would you pay to increase your sales by 40%? Likely a lot more than the cost of a guarantee

And why would someone want their money back?  Most likely because they’re not happy with your app. Honestly, it doesn’t matter how wonderful your app is. Some people won’t like it. Remember the last time you got that snarky 1-star review on the App Store? How much would you pay to click the erase button?  Most people given a chance to get their money back will simply not leave a review.  A bad review is usually just someone venting steam.  And when they get their money politely and graciously refunded, that steam has already vented. For many people, the money is only part of it.  Feeling like they’ve been heard and getting a well mannered customer response goes a long way to changing their attitude towards your app.

And offering a money back guarantee allows you to engage in a dialog with your customer that you might never have had. People telling you they love your app only tells you one thing – asking people genuinely why they don’t love you app is some of the best market research you can do for developing your product.  But don’t force them to give you a reason.  Don’t argue about the product.  If they don’t understand something about your app, let them know, but now’s not the time to re-educate them on how great your product really is.

You might be surprised by how few people actually ask for their money back.  At OfficeTime, it’s a fraction of a percent.  It’s really a drop in the bucket all things considered.

What about Apple’s App Store.  It makes it hard for you to refund money.  Not only is there no built in mechanism to refund a customer, but Apple continues to keep their 30% cut.  That means when you refund a customer you genuinely are losing money. Just remember, it’s a marketing cost.  And the truth is, the time you or your staff spends processing the refund will cost you more than that 30%.

So how do you refund on the App Store? We offer our customers 3 choices. Paypal, a check mailed to them, or an Amazon Gift Certificate.  We’d love to offer an iTunes Gift Certificate, but they have a minimum value of $10.00 and we sell our App for less than that despite marketing advice to the contrary. (PS: So far, no one has taken us up on the physical check.)

And how long should your guarantee be? The short answer is: long.  A short guarantee makes it more likely the customer will take you up on it. They feel a time pressure to cash in the guarantee before it’s too late.  With a long guarantee, the customer feels they have more time to make up their mind. And the longer the customer spends using your app, the more time they have to get to know you and fall in love with what you’ve created. It becomes less and less likely they are to request a refund. We offer a 120-day money back guarantee. Why? We liked the sound of the number. The truth is, if someone asks nicely, we’d likely refund even past that.

And what about upgrades?  If your money back guarantee is longer than your period that you’d give free upgrades to a new version, you might have customers requesting their money back in order to buy the new version.  But again, you may wish to consider this just another marketing cost.

Some traditional software apps offer a money back guarantee, but very few App Store apps do. We’ve always offered both and it’s been valuable for both our customers and us.  Dollar per dollar, I couldn’t ask for better marketing.

Time. The real commodity.
Stephen Dodd, Founder of OfficeTime.net

PS: You can download the free version of OfficeTime iOS at http://bit.ly/OfficeTimeFree – and get a 21-day trial of the desktop version at http://OfficeTime.net.  Here’s to your VERY successful week!