Netherlands e-commerce watch retailer Horloges.nl wasn’t generating as many sales as they wanted from their website, so they decided to make a few changes to a banner on their landing page. One of the changes was adding guarantees for next-day shipping and a two-year warranty. In conjunction with a free shipping offer, the result was a 41 percent increase in sales, along with an increase in spending of 6 percent per sale.
As this illustrates, using guarantees is a proven way to boost sales. Guarantees relieve customer sales anxiety by reducing risk, while increasing customer confidence in your brand by offering proof that you stand behind your offer. However, to be effective, a guarantee must be handled correctly. A poorly-designed guarantee can end up costing you sales and hurting your profits. Here is a three-step approach to creating an effective, profitable satisfaction guarantee.
Create a Compelling Guarantee Offer
The foundation of a successful satisfaction guarantee promotion is a compelling offer. A compelling guarantee includes a few key elements, says conversion rate optimization consultancy Conversion Rate Experts. First, your target market needs to want what you’re guaranteeing, meaning you need a strong value offer to make a guarantee effective. Second, your guarantee needs to reduce the risk your customers face by offering compensation if they are not fully satisfied with your product or service. Third, your guarantee should support your company’s credibility by placing the risk on you if your customer is not satisfied. This serves as proof that your company stands behind your products.
A good example of a guarantee that performs these functions is Cabela’s Legendary Guarantee, incorporated into promotions such as Cabela’s Cyber Week Sale, which features a full week of holiday discounts on camping gear, hunting and fishing equipment and shooting supplies. Cabela’s Legendary Guarantee ensures that customers who are not fully satisfied with their purchase can receive a full refund or exchange within 90 days. This removes any risk for the customer. At the same time, it boosts the credibility, serving to underscore confidence in products.
Weigh Your Risk
Before running a guarantee offer, you should weigh the risk of how much you stand to lose if a number of customers invoke your guarantee. To do this, you should create a table that tracks percentage of customers who invoke your guarantee in rows against uplift in conversion in columns. You can then use some sample numbers to track your net change in profit given different rates of customers who take advantage of your guarantee. This will let you know how much risk you face by trying out your guarantee, which in turn will give you an idea of how long you can safely run your guarantee when you’re first testing it. If your estimates show you run a high financial risk, keep your initial testing period short until you’re sure your guarantee works.
Test Your Offer
The next step is testing your guarantee to make sure it generates the results you want. Run an A/B split test with your guarantee to see how it performs against your standard offer minus the guarantee. Run it for a limited time at first so you have an opportunity to check performance before proceeding.
After your test period expires, check your results. Measure your increase in sales, as well as the cost incurred from customers who invoked your guarantee. Hopefully, you will be pleasantly surprised to find that your guarantee generated more revenue than it cost you. It’s best to repeat your test several times by extending the test period. This gives you more data to verify that your guarantee is working. After you’re confident in your guarantee, make it a permanent part of your sales copy.
You can also use this procedure to test different versions of your guarantee. For instance, you can substitute a stronger offer for your original guarantee to see whether the extra risk you take on is compensated by additional profits. An example of a stronger guarantee would be allowing a customer to keep a product instead of exchanging it even after they’ve been given a refund.
If you implement this strategy, you may be amazed at the results you get. Crazy Egg cofounder Neil Patel reports a 21 percent increase in sales and 6.4 percent increase in profit after adding a money-back guarantee to an offer for his Quick Sprout Traffic System. Guarantees work.