How to Determine Whether to Offer a Guarantee on Your Products Or Services

Customer Loyalty in Business
One of the most difficult decisions for a business to make is their decision about return policies and membership guarantees. Businesses have to look at every possible situation when determining whether to offer a guarantee, and how long to offer that guarantee for.
Why Offer a Guarantee?
As a business, you can demonstrate confidence in your products by offering a money back guarantee. Customers will look at your money back guarantee and develop a sense of confidence in your product because when they see that you offer a money back guarantee they will feel better about purchasing your product.
Customers may exploit Technology Consulting Career Path your policy
In any business you are going to have customers or clients that will take advantage of your return policy. It’s the reason why Costco and Borders both had to change their extremely liberal return policies. People were taking advantage of the companies’ generosity. As a business owner, you must take into consideration the fact that people will always try to exploit your policies. So while you may want to offer a five year no-questions asked guarantee because you are so confident in your product, it may not be the best business decision.
Make sure to manage your accounting correctly
Depending on your accounting method and the business that you’re in, your money back guarantee may be considered a liability, or at least a portion of it. For example, if you offer a 30 day money back guarantee, its possible that you may need to include liabilities for those items that are still under guarantee. This can sometimes Business Strategy Consultant Job Description cause liabilities to show a larger value than assets which could be a problem when looking for or maintaining lines of credit. You need to talk to an accountant and a tax adviser about how a money back guarantee may affect your accounting. In some instances it may have a large effect and some businesses will see no effect at all.
Except in unusual circumstances, adhere to your own return policy
Legitimate businesses don’t usually deny returns when they are made within the specified return policy because that’s sometimes illegal, and always highly unethical. The problem that many businesses get into, especially the small businesses is that they don’t adhere to their own return policy. They really want to keep the customer happy, and will often times process returns even when those returns are outside of the return policy window. You should never try to cheat customers by making a return policy so difficult that they can’t reasonably process a return within a short amount of time, but if a customer calls up after 40 days for the first time and asks for a refund, and you have a 30 day refund policy, its almost never in your best interest to process the refund.
It creates major accounting problems, especially at the end of the year or at the end of each quarter when reports are being created and taxes are being calculated. Depending on your merchant processor, and the customers method of payment, it can also become very costly to process returns. The only real circumstance where you should process a return after the return window has expired is when the last day lands on a non-business day, or the customer tried to contact you within the period, and they couldn’t get a hold of you. Remember, if you feel that you simply aren’t giving customers enough time to try out the product or service, you can always extend your return policy and make it retroactive to apply to all previous customers.

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