What I want to talk about today is something that’s really critical to any and every business, which is using a really strong risk reversal guarantee to improve your conversion rate.
Now, as you know, people are wary about buying from companies they haven’t heard of. Think about the products you might see advertised on Facebook, Google AdWords, Instagram, or basically any of those social channels.
Even if you like the product, you’re probably a little bit wary about buying from that company. Your customers are exactly the same.
You’ve probably heard that the average person needs to be exposed to a business at least seven times before they’ll buy, because that builds trust in the business and also likability.
Today, the barrier to entry to launch almost any type of company is really low. It’s pretty easy to build SaaS software. It’s pretty easy to set up an e-commerce business. It’s pretty easy to do consulting or set up an agency — and it’s even easier now for your larger competitors to reach the same market that you’re going after and to outspend you.
How To Stand Out In A Crowded Space
So how do you stand out in a crowded space? Well before we get to that, if you’re not in a crowded space, there’s probably not a lot of customers for you to serve.
Or, if you say you’ve got no competition, then I’d say good luck because you always want to be playing in a market with quite a few competitors — that means the market is validated and there are customers buying the kinds of products you want to sell.
You really need four things to build trust which can lead to a sale. You probably know what most of these are:
- You need a great product that’s priced right for your market.
- You need an authentic story about why you started the business, so think about Toms Shoes for example, Richard Branson with Virgin, Elon Musk with Tesla. You probably know their authentic stories or what I call their founding stories about why they created their various companies.
- You need testimonials or case studies from happy customers.
You also need a fourth piece, which is complete risk reversal to cover their purchase.
Risk Reversal Examples
Let’s look at three really good examples of risk reversal for different business types.
If you’re in SaaS or software, there’s the 30-day refund guarantee, which means at any time within the first 30 days after purchasing, they can send an email or give you a call and get a refund. No questions asked. No harm, no foul.
You don’t make them jump through hoops. A strong refund guarantee is a great way to stand out in a crowded space like SaaS.
Even better than a 30-day refund guarantee is to give a 200% refund guarantee if the product doesn’t provide a specific result when it’s used in the way that you direct them to use it.
That’s a really, really strong refund guarantee.
If you can tie your SaaS product to a measurable outcome within a certain timeframe and you’re very confident that if they use your product in the right way (and you can track that and prove it), that if they don’t get a result, you’d give them a 200% refund guarantee on what they paid you.
It makes it very hard for them to say no, which, of course, is the idea of a risk reversal.
Now, for e-commerce, free returns within 30 days is fairly standard now, but you’ll be surprised in a lot of markets where there’s no refund guarantee or it’s not promoted aggressively.
If you’ve read Tony Hsieh’s (the founder of Zappos) book, Delivering Happiness, they did a 365-day free return policy where they covered the shipping to send the products back and that’s essentially what helped them grow to a billion dollars in revenue so quickly — as well as their amazing customer service.
The third example is for services business, professional consulting and digital agencies. I take this approach in my training business where I mentor founders of software, tech and digital agency businesses who want to scale from low 7-figures to high 7-figures quickly.
The way that I get almost an unlimited numbers of founders wanting to talk to me is simple — my pitch is that I’ll give you a free strategy session on the phone if you qualify.
Basically, part of that pitch is you get on the phone with me for an hour. We’ll come up with a plan to double or triple your business. I’ll give you the three or four things you need to do to make that happen based on my 15 years experience building now eight different companies.
The hook is this — if you get on the phone with me and you feel that I’ve wasted your time, tell me before we get off the call, and I’ll immediately send you $500 via PayPal.
That’s the risk reversal that I use. It works incredibly well and of course I’ve never had one person take me up on it. And I’ve done hundreds of strategy session calls.
I’ve seen a lot of agencies and other consultants,mentors,coaches and professional services firms use the same approach too. Works well.
Another way to be creative with your risk reversal is to tell them if they don’t achieve a specific result within a certain timeframe (such as six months), you’ll give back 100% of what they paid you.
Again, you’re making it very easy for them to say yes and very, very, very hard for them to say no.
You know you’ve got a good risk reversal when they almost feel stupid for not taking the next step with you because you’ve made it so easy to say yes.
If you look at all of the great businesses that grow so quickly, especially in SaaS, especially in e-commerce, especially in agency land, they have strong risk reversal guarantees in their businesses and they use them aggressively.
Why Risk Reversal Works So Well
Most of your competitors (if you go out and actually have a look at their websites and their marketing material) probably don’t have a strong risk reversal guarantee.
They probably have something really weak and really tepid where there’s a lot of terms and services attached to the risk reversal and you have to do it within this timeframe, by emailing this person or sending them a letter (seriously).
Risk reversals work so well because you can lead with your risk reversal in your marketing, in your ads, on your website, wherever you put a call to action for them to take the next step and move down your funnel.
You can lead with a risk reversal and mention a specific outcome that your business will help them get. Guaranteed, or your money back.
Basically, you want to get them in the frame of mind that you are the right product, services company, etc, to get them the result — and you feel so confident about it that you’re essentially saying “here’s our big risk reversal for you that makes it a no-brainer to take the next step and work with us.”
Qualified Prospects Only
The other thing you need to do with risk reversals is make sure you qualify the prospects or clients that it applies to. Don’t just put out a blanket risk reversal and let everybody buy your product or service because it won’t be a fit for everyone.
My risk reversal, as I mentioned, is if you get on the phone with me and you feel like I’ve wasted your time, I’ll pay you $500 before we get off the call, but I only talk to founders and entrepreneurs running businesses doing $1M or more in revenue that are in software tech or digital agencies, which are the businesses that I as an entrepreneur know how to grow, because I run them myself and I’ve got a history of doing that for 15 years.
If I offered that guarantee to someone starting out selling dog collars in an e-commerce business where they have no revenue, I may not be able to help them grow because that’s not my expertise.
Therefore, I’m putting MYSELF at risk by targeting the wrong audience. You really have to make sure that you’re collecting and attracting the right kinds of prospects and customers before you go and apply a strong, confident risk reversal that will make you stand out in the market.
The third reason a risk reversal like this works so well is because it can arm your sales reps with the firepower they need to get a deal over the line.
It also makes sure they bring on prospects who are better suited to your product and what you sell because, if they do want that risk reversal and take you up on it, then your salespeople can lose their commission.
It has a double benefit there:
- You get more clients through your sales team, but
- They’re incentivized to bring on better clients who are a better fit for your product, otherwise, they can lose their commission if they ask for the refund down the line once they’ve already become a customer
How To Act On This
If you don’t have a risk reversal, here’s what I would do next. Go look at your market and look at who the leaders are in your space and find their risk reversal, find how they deal with no’s and find how they overcome the objections in the sales process.
You might want to give them a call. You might want to pose as a lead or an interested customer to see their sales process.
I guarantee you somewhere, if it’s not smack-bang in the middle of their website, on their homepage or on their checkout page, they have a strong risk reversal.
Figure out what it is and learn to apply something similar to your business.
What’s Your Plan To Grow Your Revenue In 2018?
As I mentioned earlier in this post, I’ve been mentoring tech founder since 2011. I currently advise 20+ high-growth startups. Current and former companies I’ve helped grow include Drift, Foundr, BigCommerce, Praetorian, Airtasker, Zookal, OpenAgent and FollowUpBoss to name a few.
This year I’ve decided to work with a few additional founders to help them grow their businesses using the same strategies I’ve been using to build high-growth tech companies since 1999.
If you’re running a software, tech or digital agency business that’s doing $1M or more in revenue and you’d like my help to grow faster with less guess work, less stress and more consistency, check out mitchellharper.me/blueprint 🚀