Risk reversal: the power of extraordinary guarantees

When you minimise the risk factor in a purchasing decision a lot more customers are likely to say "Yes".

One of the best ways of minimising the customer's risk level is to guarantee your product. Plenty of products come with a "guarantee". They are mostly little more than generic statements (satisfaction guaranteed or your money back) or bare compliance with legal requirements.

To really differentiate your product requires an extraordinary guarantee. An extraordinary guarantee is one that takes the maximum risk out of the purchase for the customer. An extraordinary guarantee can really contribute to improving sales, attracting more new customers and getting greater loyalty from your existing ones.

What makes a guarantee an extraordinary guarantee? The basis of a really effective guarantee is that it must inspire trust in the business that offers it. In the prospect's mind this sort of guarantee goes a long way towards "proving" that you can give them exactly what they need. Do that and you have gone a long way towards tipping the scales towards a sale.

Here's an example from a wedding photographer.

If, because of any fault on my part, your wedding photos do not come out I will:
  • Have the bride's and the bridesmaids' dresses dry-cleaned

  • Re-hire or dry-clean both sets of parents' outfits

  • Re-hire or dry-clean the groom's and the groomsmen's suits

  • Pay for another bridal bouquet and bridesmaid's bouquets of the same design

  • Re-hire the wedding cars

  • Re-book the church

  • Re-invite the guests

  • Have a copy of the wedding cake made

Put yourself in the place of the young, about-to-be-married couple who check out two photographers. One says, "Trust me. I'm an expert at this". The other says, "This is your special day and it's important that you have a great set of wedding photos as a reminder... and that's why I offer this guarantee."

This is a perfect case of a guarantee that is based on risk reversal - the risk of doing business with the company is now transferred to the business owner. If the photographer drops the camera in the pond on the way home the customer will still get their "wedding day" photos. So what have they got to lose? What's more there are no strings attached. Making your guarantee unconditional means that you don't require customers to meet any conditions in order to receive the refund, replacement, or free services.

Risk reversal can apply in a number of ways. Some businesses don't take any money until the customer signals they are happy with the product or service. For instance:
  • An interior decorator won't expect payment until their client is completely satisfied with the work they've done, or

  • A commercial safety helmet distributor offers to buy back any units not sold in the first three months
In each case the customer has made a risk free purchase because they know they'll get what they needed, an increase in sales, a decor that's just right, or they won't have to pay; the seller has taken out the risk in the deal.

Now comes the obvious question; if I offer this sort of guarantee aren't I asking to be ripped off by unscrupulous customers?

To be able to offer guarantees like these you do need to be sure you can deliver on what the guarantee covers - top quality product and top customer service if it's that; or on time delivery every time; or satisfaction with your services; or being available on the emergency contact number 24x7 - or whatever.

Whatever the basis of your guarantee, you must be able to deliver. And if you can, then where's the risk in offering an extraordinary guarantee?

Contact us

Email results@businessacademy.nz


Skype PhilANZ


Phone 04 920 0911


P.O. Box 30-545, Lower Hutt 5040

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