How to Win Customers Loyalty with Your Refund Process

Customer Loyalty
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It was ok but the ending sucks.

Have you ever heard that about a movie? I’m sure you have probably said it too at least a few times.

That’s a common review of a movie that had great special effects, outstanding cast, good action scenes but failed to deliver an amazing ending.

So this movie was 95% good but the last 5% wasn’t good enough which completely changed your entire experience.

Now relate this to your customer service experience.

You built a great product and created an awesome website to represent it. You even offered phenomenal support when the user needed help.

However when the user asked for refund, you got emotional and stopped caring.

Guess which part of that experience your customer is going to remember? If you guessed the last one, then you’re correct.

We as humans have selective memory about our experiences, and this is explained by the cognitive memory bias, Peak-end effect.

Peak-end effect suggest that people seem to perceive not the sum of an experience but the average of how it was at its peak and how it ended.

Often we spend all of our energy on making the best first impression, but pay very little attention to the end of an experience, the refund process.

By optimizing our refund process, I have been able to convince dozens of refund accounts to purchase back at a later date and become loyal customers.

No Questions Asked Refund Policy

Refund Policy
Often digital products advertise a 14 days to 90 days no-risk money back guarantee.

Having a money-back guarantee like this helps with initial conversion because it increases trust. That’s why I have it on all of our products.

So where did I go wrong?

Like most others, I wasn’t truly offering a “No Questions Asked” refund.

When a customer requested a refund, I took it as we failed. I wanted to go above and beyond to help fix the problem. My usual next response would attempt to offer further assistance, ask user where we failed so we can improve, and give user the option of going straight to claim their refund.

I thought that was pretty hassle-free. Specially because some of these users asking for refund didn’t even create a support ticket. I just wanted to help, but I wasn’t.

A user shouldn’t have to justify why they need a refund. Specially when the refund policy often says “get a refund if you don’t like our product, no questions asked”.

Result:

With my initial refund workflow, I got three type of responses from users.

First and most common: User would give me feedback and request a refund.

Second: User would complain further, remind me that the refund policy stated no questions asked, and request a refund or threaten a chargeback.

Third: User would accept the help and stay as a customer.

From a developer’s perspective, this doesn’t sound like a broken process because I was getting some valuable feedback. Yes, I had some angry customers, but so what everyone has those. Lastly, I was happy helping users who wanted help and stayed as customers.

But ask yourself, how do you really want your customers to remember your product while keeping in mind the peak-end effect.

I wanted to earn customer’s trust so even if they weren’t satisfied with our existing product, they’re at least willing to give us another try at a later date.

Second, I wanted to have a chance at them trying our new products with comfort knowing that they will always get a refund “no questions asked”.

Third, I wanted them to keep us in their kind words regardless of their experience. I wanted to leverage the memory bias in my favor.

Changing our Refund Process

In order to create a memorable refund experience, I created a new workflow that truly offered a no questions asked refund. I made our vision clear to the entire customer support team, so that everyone was on the same page.

In the new workflow when a user requested a refund, a canned response is triggered:

Hey First Name,

Thanks for reaching out. Your refund request has been assigned to our team, and upon the completion of your refund request, someone from our team will message you to confirm your refund.

Thanks for giving us a shot, and please let us know if there is any way we can serve you as a customer in the future.

Why this canned response vs. simply authorizing the refund? Well that’s because not every customer service rep has access to our payment processing accounts. During the wait time (few minutes to max few hours), we wanted to stay in communication with the customer to let them know that we’ve received their request and working on processing the refund.

Not only does this create a better experience, but it prevents the customer from escalating the issue by creating a PayPal dispute or a chargeback with their credit card.

In the next step once the refund was processed, we triggered the following response:

Hey First Name,

Just wanted to let you know that your payment has been refunded. If you paid with PayPal, you will see the refund in your account immediately. If you paid with a credit card, it will take anywhere between 5-10 business for the refund to be processed on your card. We sincerely hope that you can find your way back to OptinMonster someday, and please let us know if there is any way we can improve our product to make it better!

After changing to this new refund process, three things happened.

First, the tone of responses changed completely. We almost got rid of all complainers. Furthermore users expressed that they would return at a later date and recommend our product.

Second, the quality of feedback I got from users improved significantly.

Third, users started to repurchase after trying out our competitors citing that our refund process and support convinced them to come back.

Result

Customer Loyalty

Below are some actual user responses.

Hey that’s really fast and I very much appreciate it.

Hopefully I’ll be back with you guys soon – time will tell.

Kudos on the great customer service.

Thank you so much, you guys have fantastic service :)

Have a great day!

Thank you so much! I hope to be back and I will recommend you! J

This will sound stupid but can you keep my account and not refund it? I tried out few other popups, but your support is by far the best.

Thank you for your response to this. I originally purchased [competitor product] and had so many challenges integrating it and getting it to work properly… I purchased OptinMonster again last night.

So far my “customer experience” with you guys has been top notch. I’m very happy I made the switch.

Hi Syed,

In my email I said “I may take your “no questions asked” bailout and try again later.”

I have decided to keep it…How do I go about paying you again?

Final Thoughts and Challenges

The biggest challenge you face is the change of mindset (for you and your loyal team members). It hurts to see a customer leave even after you tried helping them. You gotta learn to let go.

Sometimes it’s better not to know the reason they’re leaving because it helps you keep your sanity.

When we used to ask questions before issuing a refund, we’ve gotten some of the most ridiculous reasons for requesting refund including but not limited to: pregnancy, not reading the feature list, not having enough traffic to justify using the product, etc.

People are more helpful when they’re happy. Angry customers often don’t give the most constructive feedback. By improving our refund workflow, we’ve gotten some very useful feedback.

We have used some of those feedbacks to improve our product while staying in touch with those customers. This way when we improved the product, they bought it right away.

In some cases, our product is simply not the best fit for the customer. However after improving the refund process, we have received several referrals from customers who previously requested refund.

Refunds are not easy for anyone including customers. Try to make your parting experience a pleasant one because often that’s only what they will remember.

Please note: I reserve the right to delete comments that are offensive or off-topic.

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4 thoughts on “How to Win Customers Loyalty with Your Refund Process

  1. Great insight to a very awkward situation that all of us that do customer support deal with. I think there is a fine line between trying to get feedback and beating them up about cancelling..

  2. This has happened to me a number of times, even when talking to someone and you get all excited about something and then they take an odd turn in the conversation leaving you with a WTH feeling. It could have been a year of awesomeness and then some quick reaction can make all the goodwill and effort crumble. — this happens with people and business but the approach you mentioned here is right on point. — If you promised something, do it and the customers will appreciate it ESPECIALLY on a refund policy like this.