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).