Risk Reversal to Increase Sales

            What is the biggest objection you need to overcome when closing a sale?  Is it cost?  Belief in what you have to say? Confidence in your product or service?


            While it is a different answer for every business, every business has to deal with some element of customer fear or hesitation before a monetary transaction.


            The reality is that even if you overcome these objections and close the sale, your customer walks away carrying 99% of the risk associated with the purchase.  If the product doesn’t work, breaks down, or doesn’t perform to expectations, your customer has parted with their dollars in exchange for disappointment.


            In marketing, your objective is to generate as many leads as possible, then to convert each lead into a customer, or sale.  The ratio of leads to closed sales is called your conversion rate.




            What if you could eliminate the risk involved in a transaction? Would you turn more leads into customers?  The answer is absolutely.


            Introducing a risk reversal element into your marketing message or unique offer is a powerful way to give yourself an edge on the competition and close more sales.  But how exactly are you going to do this? 


            It’s easy – just give them a guarantee.


The Power of Guarantees


What is Risk Reversal?


            Risk reversal simply refers to reversing the risk associated with a transaction – transferring it from the customer to the vendor. 


            Everyone can think of a handful of times they have purchased a product or service that did not deliver on their expectations.  A time where a salesperson made them a promise and did not deliver. A time where they lost money on a faulty product or bogus service.


            Fear of being burned or taken advantage of prevents many people from spending their money.  Customers can also be very wary of buying a product or service for the first time.


            Providing a strong guarantee eliminates the majority of risk involved in the purchase, and breaks down natural barriers in the sales process.  Guarantees will often shorten the sales process all together – skipping any

 discussion of objections – because the customer does not see any risk in “trying the product out.”


            There is also a growing consumer expectation when it comes to guarantees.  Many stores will take back anything the customer has not been happy with, and return money or store credit.  Popular health food stores encourage customers to try new or unfamiliar products by promising a hassle-free, no questions asked return process.  A guarantee or easy return policy can be the difference between choosing one business over its competition.


Your customers buy results, not products or services


            The strongest guarantee you can make is on results, not products or services.


            If you guarantee that your customer will receive the benefits or results they are looking for, the specific product or service they’ll need to achieve those results becomes irrelevant. 


            People buy benefits and results.  For example, they don’t buy water purifiers; they buy the benefit enjoying clean, fresh-tasting water.  They don’t buy lawn sprinkler systems; they buy a healthy green lawn.


            Once you understand what specific benefit or solution your customers are seeking, find a way to guarantee they’ll receive or experience that solution.  If they don’t, you’ll compensate them for it.



Remember what you have guaranteed


            While guarantees will increase sales for most businesses, they can also be the fast track to business failure if their product or service isn’t a quality one.  Take the time to ensure you have a strong offering before you implement a guarantee.


            Guarantees are most effective when you are selling someone something they need or want – not when you are trying to convince someone to purchase something they have no use for.


Increasing Conversion Rates with a Guarantee


            Guarantees can help your business turn more qualified leads into repeat customers.  Strong guarantees are big and bold, but also realistic.  They’re just a little bit better than your competition, but consistent with the industry’s standards. 


Your conversion rate


            Your conversion rate is the percentage of clients you convert from leads into customers.  The higher your conversion rate, the more revenue you will generate.




            To figure out your conversion rate, divide the number of people who purchase from you by the number of people who inquired about your product or service.  This will generate a percentage value of your conversion rate.


            Guarantees encourage and increase conversion.  They motivate potential customers to buy – and to buy from you – because you stand behind what you sell in a big way.  There is no risk involved in purchasing what you have to offer.


Creating your guarantee


            So you’re convinced your business – and your customers – would benefit from a strong guarantee.  Now what?  What are you going to guarantee?  How are you going to position it?


            Once again, this goes back to your target audience and your product or service.  What are some of the major objections your potential customers raise during the sales process?  What kind of risk do they take on when they make a purchase?  How much time will they need to test or experience your product or service?


            Brainstorm a list of things about your industry that really frustrate your customers.  They could be service-based (contractors that don’t show up, employees who don’t perform) or product-based (products that break, do not perform).  Then, take a look at your list and decide how you can make sure these things do not happen.  Think big – you can do a lot more than you



think – then determine if you can actually make good on your promise.  If you can’t guarantee the first frustration, then move on to the second.


Here are some tips on writing your guarantee:


  • Be specific. Explain exactly what you are guaranteeing.  Don’t make vague guarantees that a product will “work” or a service will make you “happy”.  These words mean different things to different people.  Guarantee specific performance or results. 


  • Include a clear timeframe. Put a realistic timeframe on your guarantee.  Very few products or services are good forever. Offer a 30-day or 90-day free trial; guarantee results within a set number of days or weeks.  This can protect your company, and sets out clear expectations for your clients.


  • Be bold. Unbelievable guarantees get a customer’s attention, so go as far as you realistically can with your claim. Find a way to stand out over the competition – which may also have a guarantee.


  • Tell them what you’ll do. Explain what you’ll do – how you’ll compensate them – if your product or service doesn’t deliver.  Be specific, talk money, and go above and beyond.



Implementing guarantees


Tell your clients!


            Put your guarantee everywhere – your website, brochures, receipt tape, in-store signage, advertisements, and other promotional materials.  It will only help attract customers if they know about it.


            Send a newsletter to your existing client base informing them of your new guarantees – you never know how many customers you can convince to come back and spend more in your business.


Train your Staff


            Once you have decided to offer your clients a guarantee, you need to ensure your staff are properly trained on the specific policies and procedures associated with that guarantee.  If you offer different guarantees for different products and services, ensure this is made clear as well.


            Presumably, your staff will be communicating the details of your guarantee, and fielding customer questions.  They will have to know how to sell the product using the guarantee as a benefit, and understand every application of the guarantee in your business.  Every scenario a customer may need to use it.


            To ensure your staff is not making any false claims or promises, create a guarantee script for them to use and stick to.  This will prevent customers from returning with false hopes for their money back, or other compensation.


Returns + Claims


            So, by now you must be thinking, “Great, I can convert more customers with a strong guarantee, and increase my sales.  But what about the added risk I have taken on from my customers?  Won’t I start to see a ton of returns and service claims?” This is a valid question.  Making a strong guarantee means standing by it and delivering on your promise.  Inevitably, when you guarantee something, someone is going to take you up on that guarantee and make a claim.  I’m going to answer this question in two parts:


  1. Stand behind your product or service. You’re not in business to scam customers.  If you sell a product or service, and you believe in it enough to offer it to your customers, it is likely a quality product or genuine service. 


            If this is a concern to you, consider implementing strong quality controls or stronger criteria for your merchandising.  Companies that offer products and services that deliver results can offer the strongest guarantees. 


            Of course you will get returns.  You will have customers come in to take advantage of you.  Just remember that as long as the increase in sales outweighs the claims, your guarantee strategy has been successful.


  1. Understand your customer’s likely behavior. The truth is that most customers will never take advantage of your guarantee – regardless of their satisfaction level.  There are a number of reasons for this.



            The first is that most people can’t be bothered to drive, mail, or otherwise seek a refund on an item under $50.  Many let the timeframe slip by, and have an “oh well” attitude.


            The second is that most people don’t like confrontation.  There is usually an element of confrontation involved in telling someone you didn’t like a product or service, and many people do not have the confidence to do so.  They’d rather eat the cost than go through the process of asking for a refund.


Handling claims and returns:


            If you do have your product returned, it is in your company’s best interest to create a system for handling these customer interactions.


Create a claim form


            Ensure that each customer who makes a claim about your product or service fills out a standard form.  Doing so will help you prevent fraud, gather important information about the customer and their reasoning, and create a “hoop” for the customer to jump through if they want their money back.




Contact Information



Reason for claim:


Keep a claim or return log


            Create a log or filing system for your claims.  This will give you a snapshot of your guarantee program, a record-keeping system, and a wealth of information about each customer’s experience and motivations. 


Use the information 


            Take the claim forms your customers have filled out, and review them regularly.  While some of the claims won’t be genuine, there will be some real feedback you can use to improve your product or service, or to modify your guarantee.  You may need to make it more realistic, or change the specifics.