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Moderators:

Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Refund policy for change of mind purchases?

What do you do if someone merely changes their mind after purchasing your app and asks for a refund?  Let's say the app works fine and they have no problems, but they just legitimately don't want it anymore.  If I decline, they can still ask for a chargeback.  How do you handle this?
PSB136 Send private email
Saturday, August 10, 2013
 
 
BTW, I'm talking about wanting a refund within 3 months or so of purchase; not years later.
PSB136 Send private email
Saturday, August 10, 2013
 
 
We have a no hassle refund policy, so we apologize the product did not meet their needs, note we welcome feedback, and refund the purchase.
Scott Send private email
Saturday, August 10, 2013
 
 
What does your refund policy say?
Andy Brice Send private email
Saturday, August 10, 2013
 
 
I normally give a refund if there's an actual problem (didn't do what they expected, even if a trial was used), but I'm talking strictly about a "don't want it now" refund.  In Scott's case above, I'm talking about a case if the product did totally meet their needs and they were happy, but then they decided they just don't want it anymore.  Maybe they found a free alternative later, or something.
PSB136 Send private email
Saturday, August 10, 2013
 
 
Refusing a refund within the first 90 days makes you look cheap.

On an extreme level, just yesterday I heard a story from someone who'd paid €50,000+ by cheque for a car.
When they were writing the cheque there was a 30cent on the end and he joked to the manager about getting that off.
The manager  wouldn't discount it!
How the hell did he get a dealership?
Drummer Send private email
Saturday, August 10, 2013
 
 
I listened to this lecture once about the 'power of persuasion'.

In the guy made the point that the moment you concede something to someone is a moment of power.
This person has said to you that your software is perfectly satisfactory.
They could have lied and said it wasn't what they'd expected but didn't, so they sound honest.
Most decent people if they are given a concession feel obligated to reciprocate.
So when you give them a refund you should tell them that you'd be very grateful to them if they'd recommend your software to others.
Drummer Send private email
Saturday, August 10, 2013
 
 
I don't think you answered Andy's question:  what does your refund policy *say*?  That is, what is written on your site that customers have read regarding refunds? 

Naively, I would think that having a written policy that says that software is refundable for any reason (including just changing one's mind) might get more purchases and ultimately more retained sales.  But then again, there is psychology data (cf. Daniel Gilbert) that shows that when people don't have a choice but to keep something, they (unconsciously) convince themselves they've wanted it from the start... Hmm...
Racky Send private email
Saturday, August 10, 2013
 
 
The product didn't meet the customer's needs because the customer is returning it. It doesn't matter that they like the program and had no problems with it, they are getting rid of it and want their money back. Saying I am sorry it didn't meet their needs, noting we welcome all feedback, and refunding the money without demanding an explanation is what produces people who are not mad and who might tell me what the real reason was. But I don't get to push it because I have a no hassle refund promise. If I badger them for a reason, that is a hassle and I've reneged on the deal. Bad me if that was the case.

That they are returning it means it doesn't meet their needs. Maybe they think it is great, but they need something more. Maybe they regret the price. Maybe they'll tell me, maybe not. If they do tell me, the reason given is not the real reason a good portion of the time anyway.

On that 30 cent off request for the car, I would have stopped right there and walked about. The 30 cents is a great test whether the dealer is going to be total assholes and nickel and dime you on repairs if you have problems, or whether they can be reasonable. It's NOT about the 30 cents, so if he says "OK fine, I'll give you 30 cents off" after you walk away, the deal is still off, as is all future dealings with this dealer.

I've walked away from many a negotiation (and an engagement or two) when something like this happens, and it's always been the right decision.
Scott Send private email
Saturday, August 10, 2013
 
 
My policy is always to refund, no matter what; but this is based on whether the app was unfit for purpose, etc.  In other words, 100% satisfaction with the software *itsef*.  It doesn't specifically state due to change of mind.  If that were the case, it would be rental software, not purchased.

Think of it this way: I bought a new laptop last week.  Now, let's say I bought it from one of you, but now I want to give it back and want 100% refund, just because I decided I don't want a laptop anymore in my life.  Would you still refund?

I agree with Scott about the 30c situation.  If someone isn't going to write off 30c on a 50,000 car, then they're immediately someone to avoid.
PSB136 Send private email
Saturday, August 10, 2013
 
 
I believe they didn't walk away because it was a car that they'd had to order in advance.
There seems to be a waiting time for some cars from Germany.
The main thing I took from it was that this is a story that is going to get around.
In my case it made no difference,  €50K cars are out of my league but plently of this individual's peers would drive that type of car.
Drummer Send private email
Sunday, August 11, 2013
 
 
"Think of it this way: I bought a new laptop last week.  Now, let's say I bought it from one of you, but now I want to give it back and want 100% refund, just because I decided I don't want a laptop anymore in my life.  Would you still refund?"

Returns of physical goods leave you in a worse place than before the guy bought it from you.

You've now got a laptop that probably cost you at least half of what you sold it for and that is now used goods.

Returns of downloadable leave you in much the same place as you were before he bought it.

So it's easier to do.
Drummer Send private email
Sunday, August 11, 2013
 
 
> Returns of downloadable leave you in much the same place as you were before he bought it.

Not true.

The other person could have received some value for free. I am not in the same place if I lose out because I have to pay the admin fees for the sale and refund.

For example, someone could have used my swabble software to process their data. Now they have finished all their work they ask for a refund.

For my software, before registering it runs in a trial mode. It's the same software but there are limitations. The output is marked such that you couldn't use it but it is enough to evaluate the quality. The trial mode has no expiry date.

When you buy, I offer a 28 day money back guarantee. I think that given the opportunities to try the software before registering it plus 4 weeks to really know if the limitations hid some aspect of the unrestricted software, then it's unreasonable to ask for a refund.

Having said that, no one has tested it yet; and if someone asked on day 29 then I might cave in.

In the UK, returning an item to a shop because you changed your mind is up to the shop's discretion. And most shops will give you vouchers rather than cash.

If you have another product, you might offer exchanging the licence. However, they could have got their value from it and now you give them something else for free...
koan Send private email
Sunday, August 11, 2013
 
 
On average we might have to spend $20-$50 in actual costs to process a refund for an order that was shipped. We lose shipping materials and shipping costs, and if they return it and want a return shipping label that cost is doubled.  Nearly all of this now is international shipping, so it's not cheap.

But I spent about 45 minutes thinking about and explaining that you should give a refund in this thread.

I have also said the same thing to the exact same people probably 10 times in the past on this board, for about 8 hrs total time on this. And in every time people want to argue about how they should not give refunds.

The reason you guys make that argument is because your businesses are failing and you are only making $0 an hour, so your time arguing with the customer and guys like me is worth $0.

My time is worth far more than $1000 an hour, so I've spend around $8000 trying to explain how to give good customer service over the years.

That was stupid of me.

Better to let you guys fail since there is no talking sense to a lot of you.
Scott Send private email
Sunday, August 11, 2013
 
 
My policy is no refunds. I provide a 30-day demo and all sales are presumed final. I'm not aware that I've ever received a chargeback.
Kevin Walzer Send private email
Sunday, August 11, 2013
 
 
I have a no questions asked 30 day return policy.  That being said I almost always refund when asked regardless of the time period and if there's a sensible way of giving them a refund.
Mark Nemtsas Send private email
Sunday, August 11, 2013
 
 
Sometimes when a customer asks for a refund I  imediately feel  'well the guy's right' and I send the refund right away.
Sometimes I feel disgusted or even offended and that's when I don't even think of refunding it.
In your case I would not refund.
alexandar Send private email
Monday, August 12, 2013
 
 
Hey Scott,

I don't think anyone here is spending hours arguing with customers about refunds. The whole point of the thread is about refund policy, i.e. a set of rules defining refunds in order to avoid wasting time thinking about it.

You claim to know the most successful way, but unless you have done AB testing or some other scientifically valid test then whatever you say is noise just as much as anyone else.

By the way, if you really are earning $1000 an hour then why the hell are you dealing with emails about refunds ? Do you personally respond to every email begging for a discount ? Surely you can afford to pay someone $200 an hour to do front line sales and thus deal with all refunds/discounts/customer enquiries.
koan Send private email
Monday, August 12, 2013
 
 
You're more likely to lose sales due to the risk the customer perceives in buying your software, than to suffer a loss due to a return.

Have a generous refund policy and state it clearly up front.
If someone beyond the policy is really adamant about a refund and very unhappy, I would still give the refund.

This happens so infrequently for me that I even allow the customer to continue using the software if they want to.  This approach has opened up some great discussions over the years about their needs, and why it wasn't a good fit. I had at least one guy come back months later and offer to re-purchase because now he likes it.

It's expensive to get customers.  I think doing something a little different at the point of personal contact goes a very, very long way.  If you can't keep the money, then keep the good karma.
Darren Send private email
Monday, August 12, 2013
 
 
Apparently Scott makes "far more" than $2,000,000 per year. That's pretty awesome all right!
GregT Send private email
Monday, August 12, 2013
 
 
If a customer wants a refund I do it instantly, without question.

I don't waste my time thinking about it.

I process it, thank them for trying the software, and wish them a good day.
Nick Moore Send private email
Tuesday, August 13, 2013
 
 
> If a customer wants a refund I do it instantly, without question.

So, I buy your app, and week later I want a refund by saying "I want my money back simply because I changed my mind and I don't want you to have my money anymore".  You'll still do it?  That's the scenario I'm wondering about.
PSB136 Send private email
Tuesday, August 13, 2013
 
 
@PSB136


Yes, absolutely, do that. Upon refunding their money in full you also revoke their product key.

They get their money back, and they won't be able to use your product anymore. Reason number 3429 to use properly designed licensing.
Wyatt O'Day Send private email
Tuesday, August 13, 2013
 
 
So, spend money on a licensing system so that after you give a refund you can ensure that person is no longer using your software, because that will maybe make you feel better?
Drummer Send private email
Tuesday, August 13, 2013
 
 
I know you're being snarky and trying to be funny, Drummer. But no, obviously feeling warm and fuzzy inside isn't the point of licensing. (Although, if it does give you the warm & fuzzies, then more power to you.). I've covered this about a hundred times in this forum. And I believe at least twice with you.

I'll limit my discussion to the very narrow context of licensing with regards to refunds and chargebacks.

Let me start by defining "properly designed licensing". In this narrow context of refunds/chargebacks, "properly designed licensing" is simply hardware-locked licensing with the ability to revoke product keys.



The point of properly designed licensing in this context (refunds), is that you prevent fraud. Namely, properly designed licensing will stop the cases where malicious users buy a product key then ask for a refund of make a chargeback with the intent on continuing to use the license.

How does properly designed licensing stop that? You revoke the key and thus the product key becomes useless. I.e. they won't be able to user your app after getting a refund or making a chargeback.


So why did I mention this in the first place? Because "PSB136" was worried about the case where a user asks for a refund 1 week after a purchase (and presumably some period of time with a functioning trial).


Does that make sense?
Wyatt O'Day Send private email
Tuesday, August 13, 2013
 
 
Wyatt, I don't think you "answered" Drummer's "question", which I think was "why prevent fraud at all?  Just to make you feel good?"

And I think one answer to that is found in a post by Stephane Grenier here ( http://discuss.joelonsoftware.com/default.asp?biz.5.854110.10), who wrote:

"...once we implemented the license validation check the number of refunds dropped significantly within no time. Not only that, but of those that do request refunds, many end up re-purchasing it shortly after. The percentage is still around 50% the last time I checked."

So, Drummer, maybe not just feeling good, but selling more?  (I know not of what I speak, but I did just read Stephane's point recently and thought I'd throw it in the mix).
Racky Send private email
Tuesday, August 13, 2013
 
 
I have no system to prevent users from still using the software after they ask for a refund.  My refund rate is well under 1% and has been for several years, long enough to be statistically significant.  In my case, at least, spending time building systems to prevent refunded software from being used would be a waste of effort.

My customers (generally small businesses) are clearly different to those mentioned in the above link.
Mark Nemtsas Send private email
Tuesday, August 13, 2013
 
 
Our return rates are also 1% or less, and we have an ease of refund similar to the comments by Mark, Nick and Darren.

We don't phone home or revoke licenses. If you keep a copy, you have violated the license just like if you install on two computers and use it at the same time as your wife on the other one. That's your moral decision. If you keep an illicit copy you won't be able to get updates since we revoke the key in a way that blocks updates, and you will be stuck on the last version you had. You'll also run into problems requesting customer support, and you might even feel guilty.

Some pirates contact us for customer support. We accept bug reports but don't go beyond that. Sometimes they end up becoming customers, sometimes they don't.

A few times someone asked for a refund long after the warranty ended. I approved those refunds.

Although you don't have to give a reason, a lot of people feel they want to let us know the reason. Sometimes someone returns it because it doesn't work for them because our sales information wasn't clear enough and confused them, or they found a show stopper bug. In some of those cases we refund the money and officially let them keep the license, including minor versions.

Other companies are more uptight and paranoid and that is their right. I am uptight and paranoid regarding bugs and incompatibilities and performance of software, in short, in issues regarding machine interfacing. With human beings I am easy going and permissive. Other companies do it the other way, they are  permissive and sloppy in their coding, and uptight and strict with their customers, the real people. I believe that businesses which are easy going with customers, and strict with product quality are much more successful than companies that are strict with customers and lax with product quality. That's just me though, a lot of "hard asses" think I am wrong, and that is their right.

Regarding the person who tried to pull a fast one and misrepresent  my comments, no of course I don't handle refunds myself, that is what my average paid customer support handles. Only in extreme cases do I have to offer an opinion. Customer support knows what to do - issue the refund and a sincere apology, and listen if they want to talk. When they talk, I do see all of that feedback myself, because that is where the value is.
Scott Send private email
Tuesday, August 13, 2013
 
 
@PSB
> So, I buy your app, and week later I want a refund by saying "I want my money back simply because I changed my mind and I don't want you to have my money anymore".  You'll still do it?  That's the scenario I'm wondering about.

Yes I absolutely still do it (and have done it). I just give them their money back. They are happy, I'm happy, everybody wins.

And yes they get to keep their license key. I don't use anything like Wyatt's system. I err on the side of assuming good faith.

I suppose there is a chance that they might have "tricked" me, but I don't care.

Move on to the next customer.
Nick Moore Send private email
Wednesday, August 14, 2013
 
 
> I believe that businesses which are easy going with customers, and strict with product quality are much more successful than companies that are strict with customers and lax with product quality.

Well said Scott.
Nick Moore Send private email
Wednesday, August 14, 2013
 
 

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