The Ultimate Risk Reversal

Risk reversal is often a critical component of a successful sales piece or marketing campaign. This is because the biggest objection you must overcome in a sale is the prospect’s concern about the quality or effectiveness of the product he’s buying.

“What if it doesn’t work the way it’s supposed to?” he worries. “What if it breaks down?”

It’s not that customers fear making a good decision instead of the best decision. What they really fear is making a bad decision.

Risk reversal goes over and above other proof elements like testimonials and cases studies. A prospect may very well believe anecdotal proof (testimonials)… and he may believe the scientific proof (if there is any). And yet he will still think, “That’s all well and fine. Clearly, it worked for them. But will it work for me?”

So the most common risk reversal strategies are money-back guarantees. Example: If you buy the product and have second thoughts, return it within 30 days for a full refund of your money.

From this basic guarantee sprout all kinds of variations.

Weak: 30-Day Money Back Guarantee

Return the unopened product in resalable condition within 30 days for a full refund of your money.

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Better: 90-Day Money Back Guarantee

Buy the product. Put it to the test and see for yourself just how effective it is. Then if for any reason (or no reason at all) you’re not completely satisfied, return the product within 90 days for a full refund of your money.

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Best: 1-Year Money Back Guarantee

Try out our home study course. Go through all the material. Start using it to make more money immediately. If you don’t see immediate and consistent results, return it any time within 1 year of your purchase date for a full refund of your money.

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These are just examples off the top of my head to illustrate the different types of guarantees that are commonly used.

In general, the longer the guarantee period, the fewer refunds you’ll have. That’s because people forget what they’ve purchased and the length of the guarantee.

There is an exception though. I once got the inside scoop on a company you’ve probably heard of that offered a lifetime guarantee. Problem was, they would get refunds 5+ years from the purchase date. There was literally nothing they could do with the returned product because it was out of date.

Basically, people would get into a money crunch. Then they would happen to stumble upon this product somewhere in their house and would see the lifetime guarantee on the side of the box. So they’d call up the number and ask for a refund so they could pay their bills that month.

So while a 1-year guarantee period may be best, it doesn’t mean a lifetime guarantee will be better.

Out of these basic guarantees come stronger “conditional” guarantees. These types of guarantees promise a certain result if a customer can demonstrate he used the product as described.

With a conditional guarantee, you can be bolder because part of the guarantee rests on the purchaser’s ability to follow-through and take action. So, for instance:

1-Year Double-Your-Money-Back Guarantee

Download the ebook today. Read it from cover to cover. Put the information to work and see for yourself just how much (and how fast!) your business grows. Then, if you don’t make at least 10 times what you paid for the ebook within the next year, just drop us a line and we’ll refund you twice the amount you paid. That’s double your money back!

Obviously, you must show proof that you used our strategies exactly as we describe them. No refunds will be issued for people who decided to “do their own thing” — or did nothing at all. So, if you’re serious about your business… and you’re committed to taking action… then you literally can’t go wrong. You make 10 times your investment within the year, or you get double your money back. It’s that simple.

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Notice how in this guarantee, the customer must take action and implement the strategies to qualify for a refund. This puts 100% of the risk on you for the quality of the information you provide… but it puts 100% of the risk on your customer for taking action.

If you can promise a very specific result from your product, then this may be a good risk reversal strategy to use, especially since so few people use it.

The key to creating a powerful risk reversal strategy is to understand your prospect’s thinking. What is he worried about? What is keeping him from buying right now?

Answer these questions and you may have the start of a powerful new guarantee.

That’s exactly what Hyundai did when they invented “America’s Best Warranty.” It’s a 10 year/100,000 mile warranty that covers the engine and some additional components. This warranty is in addition to the standard new car 5 year/60,000 mile warranty, which covers nearly every new car component.

At the time when it was introduced, it was unheard of, especially for an automaker that wasn’t exactly known for reliability. Hyundai executives knew that car buyers were leery of the Hyundai brand because of their history of producing mediocre “econo boxes.”

To overcome this perception that Hyundai cars were unreliable, they invented a warranty stronger than any of their competitors had. Instantly, they became a market leader since nobody else could offer such a strong warranty.

This move totally turned Hyundai around. Customers flocked to buy their cars. Soon other manufacturers were copying them and inventing similar warranties just to compete.

Now, it seems Hyundai may have done it again.

Right now, most consumers are hesitant to make any big purchases because they fear getting laid off. They fear pay cuts and a general decline in their purchasing power.

Given the circumstances, Hyundai has introduced the Hyundai Assurance program. From the web site:

Right now, finance or lease any new Hyundai, and if in the next year you lose your income, we’ll let you return it. [...] Hyundai is the first automaker to offer a vehicle return program in the U.S. that allows you to walk away from your loan or lease without having to worry about negative equity. It lets you return your vehicle in case of certain life-altering circumstances. That’s the Hyundai Assurance.

I imagine this new risk reversal strategy will create a nice bump in sales for Hyundai… even while other car makers suffer.

Ask yourself:

  • How can you strengthen your guarantee?
  • Is there anything you can do to address the market’s concerns right now?
  • If you had to invent a risk reversal strategy that none of your competitors are currently using, what would it look like?

-Ryan M. Healy

18 Comments

  • dianacacy

    January 7, 2009

    Love this article, Ryan. Well said.

    It’ll be interesting to follow Hyundai’s progress with this. It has a lot of potential.

  • dianacacy

    January 7, 2009

    Love this article, Ryan. Well said.

    It’ll be interesting to follow Hyundai’s progress with this. It has a lot of potential.

  • Note Taking Nerd #2

    January 7, 2009

    Hey Ryan,

    The Hyundai example you used here was brilliant.

    It speaks directly to the conversation people are having with themselves and their spouses.

    I wonder if there are any weasel clauses built into it.

    You know, the whole 2 point copy buried on page 18 of the contract that says “Hyundai will honor guarantee if and only if these conditions are met:

    Vehicle must have retained “new car smell”. Paint job is better-than-when-you-purchased it. And no maintenace problems or potential problems exist.

    This is what we need to be concerned with if we do use a conditional guarantee. The “I knew this sounded too good to be true” response when we craft a risk reversal proposition.

    By law we have to refund people their money if they ask for it by a certain time so I don’t cower away this fact.

    If I’m sweetening the deal by using a conditional assurance guarantee I always make sure there’s a unconditional one before it or after to eliminate the “I knew they were pulling my chain” reaction.

    Talk again soon,
    Note Taking Nerd #2
    http://www.mynotetakingnerd.wordpress.com

  • Note Taking Nerd #2

    January 7, 2009

    Hey Ryan,

    The Hyundai example you used here was brilliant.

    It speaks directly to the conversation people are having with themselves and their spouses.

    I wonder if there are any weasel clauses built into it.

    You know, the whole 2 point copy buried on page 18 of the contract that says “Hyundai will honor guarantee if and only if these conditions are met:

    Vehicle must have retained “new car smell”. Paint job is better-than-when-you-purchased it. And no maintenace problems or potential problems exist.

    This is what we need to be concerned with if we do use a conditional guarantee. The “I knew this sounded too good to be true” response when we craft a risk reversal proposition.

    By law we have to refund people their money if they ask for it by a certain time so I don’t cower away this fact.

    If I’m sweetening the deal by using a conditional assurance guarantee I always make sure there’s a unconditional one before it or after to eliminate the “I knew they were pulling my chain” reaction.

    Talk again soon,
    Note Taking Nerd #2
    http://www.mynotetakingnerd.wordpress.com

  • Ian Brodie | Sales Blogger

    January 7, 2009

    Ryan – the Hyundai guarantee sounds really something. The key for me is that they are taking a risk themselves – and that makes it more real. If they have to take a car back they will be losing money on it. They’re basically giving a free unemployment insurance policy to their customers.

    For me, in contrast, many of the “money back” guarantees on information products are meaningless.

    As you say, my fear is not about making a good decision instead of making a great decision – it’s of making a bad decision.

    But the true impact of making a bad decision isn’t the money wasted on the product – that’s trivial compared to the damage that is likely to be done to my business by following bad advice. Screwing my SEO, wasting my time on business ideas that don’t work, etc.

    A money back guarantee on an information product doesn’t really help me with that. I find that testimonials and case studies (if I believed them) would be stronger. What is especially strong is reading information from the seller in advance so I can judge the quality of what they say. That’s why blogs like yours are in fact stronger “guarantees” for any products you sell that a money back guarantee.

    Ian

  • Ian Brodie | Sales Blogger

    January 7, 2009

    Ryan – the Hyundai guarantee sounds really something. The key for me is that they are taking a risk themselves – and that makes it more real. If they have to take a car back they will be losing money on it. They’re basically giving a free unemployment insurance policy to their customers.

    For me, in contrast, many of the “money back” guarantees on information products are meaningless.

    As you say, my fear is not about making a good decision instead of making a great decision – it’s of making a bad decision.

    But the true impact of making a bad decision isn’t the money wasted on the product – that’s trivial compared to the damage that is likely to be done to my business by following bad advice. Screwing my SEO, wasting my time on business ideas that don’t work, etc.

    A money back guarantee on an information product doesn’t really help me with that. I find that testimonials and case studies (if I believed them) would be stronger. What is especially strong is reading information from the seller in advance so I can judge the quality of what they say. That’s why blogs like yours are in fact stronger “guarantees” for any products you sell that a money back guarantee.

    Ian

  • Scott Birkhead

    January 8, 2009

    I just saw a great one from a window company – transferable lifetime guarantee on glass, screens, labor and installation…in other words, any major issue you might have is covered for the life of the window, transferable, from a 25 year old company.

    I was kind of blown away…

  • Scott Birkhead

    January 7, 2009

    I just saw a great one from a window company – transferable lifetime guarantee on glass, screens, labor and installation…in other words, any major issue you might have is covered for the life of the window, transferable, from a 25 year old company.

    I was kind of blown away…

  • Ryan M. Healy

    January 8, 2009

    @Diana – Thank you. Yes, it will be interesting to see how Hyundai fares in light of this.

    @Note Taking Nerd – Well said. It’s good to have an unconditional guarantee paired with a conditional guarantee. Usually, the conditional guarantee involves getting MORE back than you paid, while an unconditional guarantee is simply a full refund.

    @Ian – Excellent insight. I especially agree with this statement you made: “The true impact of making a bad decision isn’t the money wasted on the product — that’s trivial compared to the damage that is likely to be done to my business by following bad advice.”

    @Scott – A transferable guarantee is definitely a step up. Car makers honor their standard warranties even if the car is sold to a second or third owner. But outside of that business, it’s certainly a unique model.

  • Ryan M. Healy

    January 8, 2009

    @Diana – Thank you. Yes, it will be interesting to see how Hyundai fares in light of this.

    @Note Taking Nerd – Well said. It’s good to have an unconditional guarantee paired with a conditional guarantee. Usually, the conditional guarantee involves getting MORE back than you paid, while an unconditional guarantee is simply a full refund.

    @Ian – Excellent insight. I especially agree with this statement you made: “The true impact of making a bad decision isn’t the money wasted on the product — that’s trivial compared to the damage that is likely to be done to my business by following bad advice.”

    @Scott – A transferable guarantee is definitely a step up. Car makers honor their standard warranties even if the car is sold to a second or third owner. But outside of that business, it’s certainly a unique model.

  • Terry,
    Great articles my friend. Thanks for sharing this with us. They are very informative and for some of them, one would actually need to pay but it is nice to see FREE stuff like these.
    Tal
    This comment was originally posted on Internet Business Coaching by Terry Dean

  • Articles Spinning

    January 15, 2009

    Wow, those are indeed VERY well written articles. I have read and have a copy of Bly’s “Online Copywriters Handbook”. He truly knows what he’s talking about when it comes to web copy. Thanks, Terry, for sharing this.
    This comment was originally posted on Internet Business Coaching by Terry Dean

  • semmy

    January 16, 2009

    Ah Terry, you just give me an ide, you give me Brian Terry link, thank you very much!
    This comment was originally posted on Internet Business Coaching by Terry Dean

  • Carole

    January 17, 2009

    I’ve only checked out one article thus far and have learned a great deal. Thanks so much for sharing with everyone!
    This comment was originally posted on Internet Business Coaching by Terry Dean

  • Wesley

    January 18, 2009

    Thanks so much for posting these article links. I have gotten some really great ideas from several of them.
    This comment was originally posted on Internet Business Coaching by Terry Dean

  • Internet Business Mentoring

    January 18, 2009

    Great articles, and you are right a lot of valuable information. Thanks for compiling this list., I think they have immense value in the marketing field
    Kudos job well done
    Meg
    This comment was originally posted on Internet Business Coaching by Terry Dean

  • Christina

    February 2, 2009

    I don’t even HAVE an online business, but I might one day, and wanted to thank you for sharing these articles…I keep an eye out for helpful info, & this looked good to me!
    This comment was originally posted on Internet Business Coaching by Terry Dean