The Concept Of Risk Reversal Is Simple—but it requires boldness and guts. Basically, it means that YOU, the businessperson looking to close a sale, should identify the various reasons a potential customer would hesitate to buy. You then think of little things you can do to overcome those reasons.
The Risk Reversal is like a Guarantee – but way more powerful.
It’s a guarantee on steroids. The Arnold Schwarzenegger of all guarantees. The kind a buyer cannot turn away from because the buyer has nothing to lose and everything to gain.
Before we go there…let’s look at the Basic Guarantee that 90% of online and offline merchants usually have. Let’s label this Level 1 on the Scale of Guarantees.
Level 1 – The Standard Guarantee
A standard guarantee offers buyers a 30 day period to return the product for a full refund. This type of guarantee is required by law in many countries such as the USA.
It’s mediocre and your competition probably offers it too. Truly successful businesses always go beyond a Level 1 guarantee.
The next stop is Level 2.
Level 2 – The Extended Time Period Guarantee
A Level 2 guarantee will extend this 30 days period to 90 or more days.
Many sellers swear by the 90 day guarantee. By giving the customer a full 90 days to try your product you often lower the refund rate.
Let’s say Mary buys a $90 set of aerobics DVDs from your online store with a 30 day guarantee. It takes 10 days to reach her. Mary now HAS to test the DVDs in the next 20 days to see if she likes them. But she finds herself too busy. All of a sudden she has 2 days left to return the product for a full refund. It’s still sitting on her shelf untouched – feeling the pressure, she returns it unopened.
But if Mary had been given more time to try out the product, there’s a good chance she would not have felt pressured and may have taken more time to test, play and fall in love with the product.
If you’re selling products online, you can often create significant increases in sales AND lower your refund rate just by extending your guarantee to 90 days.
But Level 2 is nowhere close to what a guarantee can do.
Now we step into the Zone of Risk Reversal.
A few years ago, a guy by the name of Nick got frustrated because he could never find the right kinds of shoes he liked in the local mall. Nick went home that day and got online hoping to browse through online shoe stores – but there were few of them set up at that time in 1999.
Nick wondered if he could establish his own online shoe store. The idea kept jumping around in his head and eventually he quit his day job and founded Zappos.com.
At first people told him he was crazy. Shoes are something you need to hold in your hand before buying. You need to try them on. Feel the leather. Have your spouse see them on you and let you know what they think. There were a multitude of reasons to NOT buy shoes online.
Yet Zappos thrived. In 2005, the 6 year old company did $370 million in shoe sales!
Well let me tell you what gets most people hooked on Zappos. Sure, Zappos had a wider variety than a traditional shoe store. But it was Zappos Risk Reversal policy that really makes most prospects into loyal customers. Here’s the decision making process prospects go through before buying their first pay of Kenneth Coles on Zappos.
What if I don’t like that shade of brown? Can I return it? Zappos’ answer was yes.
If I try it on and find it won’t fit – can I return it and get another pair? Their answer: yes.
Will you pay for the shipping – and the cost of return shipping? Their answer was again: yes!
If I buy it and then randomly change my mind – can I still send it back and get my dough back. Again – the answer was yes.
If I bought it and then found one for a cheaper price on Canal Street, can I send it back? Again – yes.