I am selling a digital product for a very specific niche. Once the buyer has paid via Paypal they are sent the product as a zip file. I am currently trying to decide if I should have a "Money Back Guarantee" like many other e-commerce sites. It may raise trust and lower their fears with the product knowing they can get a refund and in the real world when people buy from the big department stores they rarely take it back. However, being a digital product they can just purchase the product, initiate a refund and I have no way of taking it off them. Even if I dont give them a refund because I think they are doing something dodgy they can probably do a chargeback via Paypal (does paypal side with the buyer or seller with digital products?). What do you guys think? Should I offer a money back guarantee?
I sell software and I can tell you right now that Paypal will almost always side with the buyer in claims. In fact, I haven't had one go my way. However, most of the time you aren't dealing with people just wanting to get your product as much as you are dealing with people who had their paypal or credit cards compromised, so you can't really fault them for the chargeback. It is frusterating at times. On a side note though, I try to keep an eye and do random searches for my scripts and I know if someone has purchased a license or not. I contact web hosts, if i can, about the abuse. I think money back guarantee's are successful most of the time, and most honest people will never want to return something they find useful at all.
Money Back Guarantee is pretty important factor when potential buyer makes their decision, so I'd say you should offer it. I offer a refund for my e-book and on the sales page I even stated that in case they are not satisfied with the e-book they can request the refund and they can KEEP the product for free. Yes... I wasn't sure about that in the beginning, but later I discovered that the percentage of those who asks for a refund is pretty low, maybe 3% of total sales. So, knowing that you cannot take the item from them after being refunded, and that there would be very few of those who ask for a refund, I'd say that giving the item away in those situations is just additional positive element in raising trust in your offer and relaxing the buyer effectively.
The return percentage is just a cost of doing business. In my former life working in retail we typically had a 10-12% return/exchange rate. After a major holiday it would soar to 25% for the next week. Some of these refunds were legitimate, some were scams. (Some even returned bricks in TV boxes, but thats another story) Even with an average profit margin of 27% we still came out ahead, selling physical goods mind you.. If a person refunds your info product what are you out? If you didn't have a money back guarantee, the fraudster wouldn't have bought your infoproduct in the first place. So it's not like your loosing legitimate customers to refunds. On the other hand, the guarantee will certainly increase your conversion ratio.
Even I provided 30 day money back guarantee in my web hosting plans. The refund rate is none, but gives the buyer a sense of security and hence they would buy from you.
I ended up providing a money back guarantee and made alot of sales. Seems it worked and haven't had a single refund yet. Now that I think about it, I'd rather refund the money of someone genuinely unhappy with a product than not provide a refund and have them say bad things about my business elsewhere.
Thought I would follow up with this topic I made a few months ago. I went with the money back guarantee and out of 100 or so sales.. Ive had two reutrns. And those two people almost had a good reason to do so. So, after using it for a few months its a good idea to have one.