People fear loss more than they yearn for gains. Once you understand that, you can completely change how you position your product or service during the sales cycle.
One of the best ways to create an offer “too good to refuse” is to incorporate a strong risk reversal guarantee into the purchasing process.
In this episode I’ll walk you through examples of great risk reversals you can use if you sell SaaS, e-commerce or agency services – and I’ll explain the psychology behind why they work so well to dramatically increase your conversion rate, even if you’re in a crowded or commoditized space.
Want my help to double the revenue of your software, tech or digital agency business in 2018? Learn more.
Hey, it’s me Mitch Harper, and welcome to episode number nine of my Insane Growth Podcast, which I’m calling Using Risk Reversal to Double Your Conversion Rate.
Now, it’s been a while in between episodes. As you may know, the last episode that went live was August 21st of last year. It’s been about five months, and the reason for that is I’ve been building a new SaaS company, which we’re about to launch. Now, I won’t say too much about that on this podcast, but, when we do get closer to the launch, I’ll tell you more about that as well. What I want to cover 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, of course, as you know, people are wary about buying from companies they haven’t heard of. Think about when you might say, “Not on Facebook or Google AdWords or 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 from that business because that builds trust in the business and even likeability, depending on how they see you over those seven different times.
Today, the barrier to entry to launch almost any type of company is really low. It’s pretty easy to build SaaS softwares. 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 first reach the same market that you’re going after and also, secondly, to outspend you. Right?
How do you stand out in a crowded space, which is what I’m amusing you’re playing in? If you’re not in a crowded space, there’s probably not a lot of customers for you to go and serve and, if you say you’ve gotten no competition, then, unfortunately, to that, I would say good luck because, in my view, you always want to be competing in a market with quite a few competitors because that means the market is validated and there’s customers buying their products.
You really need four things to build that trust which can lead to a sale. You probably know what most of these are. Of course, 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, of course, testimonials or case studies from happy customers, ideally, their videos, some might be PDFs, some might just have testimonials that you put on your website, and then you also need the fourth pieces, which is complete risk reversal to cover their purchase, and, of course, that’s what I wanted to talk to you about today.
Now, why don’t we start with 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, after buying, maybe they go from a free trial to a paid plan. At any time within the first 30 days, they can send an email or give you a call you up on live chat and get a refund. No questions asked. No harm, no foul. That’s processed straight away. You don’t make them jump through hoops, and that’s exactly what we’ll be launching my new SaaS company with, a very simple 30-day refund guarantee. Now, the reason that will work so well for us is because none of our competitors do it. It’s really a great way for us when we start to stand out in a crowded space.
Now, 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% or a 150% 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, so that’s 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, which is what we’ll talk about next. Now, Zappos, if you’ve read Tony Hsieh’s 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.
Now, the third example is, if you run a services business, professional consulting, an agency, and I did this on my mentoring, as you guys may know, I mentor founders. I’ll tell you a little bit about that at the end, but, basically, the way that I get almost unlimited numbers of founders wanting to talk to me is my pitch is that I’ll give you a free strategy session, if you qualify. I do have certain criteria, and that’s why this works so well.
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. In this year, 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, 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 $500 to you via PayPal. That’s my risk reversal that I use. I’ve seen a lot of agencies and other consultants and mentors and coaches and professional services firms use that.
The other way you can do that is, if you don’t achieve a specific result within a certain timeframe like six months, we’ll give you back 100% of what you paid us for our services. 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 digital agencies or services business, which I know most of you are in because I know my audience really well, I mean, they have strong risk reversal guarantees in their business and they use them.
Now, why do they work so well? Most of your competitors, if you go out and actually have a look at their websites and their marketing material, they 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. I’ve actually seen that, so don’t be surprised if you see one of your competitors getting you to physically post something in the mail to take them up on their refund guarantee.
Now, it works so well also because you can lead with your risk reversal in your marketing, so 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.
Basically, you want to get them in the frame of mind that you are the right product, services company, whatever it is, to get them the result, and you feel so confident about that that “here’s our big risk reversal for you that makes it a no-brainer to take the next step and work with us.”
Now, the other thing that you need to do with risk reversals is make sure you qualify the prospects or the clients that it applies to. Don’t just put a blanket risk reversal and let everybody buy your product or service because it won’t be a fit for everyone. You need to think about that as well and how you’ll plan it.
For me, for example, 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 probably $500 before we get off the call, but I only talk to founders and entrepreneurs running businesses doing a million dollars or more in revenue that are in software tech or digital agencies, which are the businesses that I, as a mentor, as a coach, as a consultant 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 at risk with a risk reversal like that. 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.
Now, the third reason a risk reversal like this works so well is because it can arm your sales reps, if you have a sales team, or if you’re thinking about building one 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 incented 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.
That’s one of the things we did so well at BigCommerce, one of my previous companies, and we built the sales team to … I think it’s about 250 people today. We had a strong risk reversal. We would take commission away from the sales reps if the client churned once they became a paying client, so it works with the double benefit there.
Now, that’s really all I wanted to cover today. If you don’t have a risk reversal, here’s what I will do next. I will go and look at your market and look at who the leaders are in your space and find their risk reversal, find how they deal with nos 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, if you’re in an e-commerce, they have a strong risk reversal. Figure out what it is and learn to apply something similar to your business.
All right, that was my first podcast for 2018. We’ll keep it fairly short. Now, if you like this, I would love a five-star review over in iTunes. If you would take a few minutes to do that, that will be great.
Now, as I mentioned earlier in the podcast, I actually do mentoring as well, so, this year, I’ve decided to take on a few more founders. If you are a founder running a business, doing one million or more in revenue and you’re in the software tech or you’re in a digital agency, then you might want to check that out. Just head to mitchellharper.me/blueprint.
Now, basically, what you’ll find there, besides testimonials and proof from my existing founders that I’ve been working with for a few years now, you’ll learn a bit more about the offer that I have, which is basically you and I getting on the phone. We’ll get on the phone. I want to learn a lot about your business if you want to grow it this year, of course. If you wanted two, three, four business over the next year or two, that’s essentially what I do as one of my roles now, besides building my SaaS company, and I’m in some real estate businesses as well.
Basically, the offer is that we get on the phone, you tell me about your business, you tell me about your challenges, you tell me about your goals, your team, what you’re spending on marketing and then, by the end of that 45-to-60-minute phone call, I’ll come up with a plan that you can use to get to where you want to go this year, and it’ll have three or four things in it around generating more leads, converting your leads to customers, better generating more clients retention, your product, your pricing, your strategy, your people, which is always a bottleneck for growth, whatever it is that you need to help you grow your business to where you want to get it to this year in 2018.
What I do is eat my own dog food. I mentioned the risk reversal that I have when I am taking on new founders for my mentoring and consulting business, which is, if we get on the phone and you feel at the end that I’ve wasted your time, then I’ll send you $500 via PayPal immediately.
Now, I’ve done hundreds of these calls since 2011. I’ve done thousands of these calls. I’ve worked with dozens of founders to grow their businesses. I estimate that I’ve added over $100 million in value to their businesses in terms of equity value since they’ve been working with me, and no one’s even taken me up on that offer to get $500. Maybe one day someone will, but, so far, no one has, so, yeah, if you wanted to learn more about that, just head to mitchellharper.me/blueprint. We’ve got everything up there for you.
Anyway, that was episode nine of my Insane Growth Podcast. I hope you liked it, and this was called Using Risk Reversal to Double Your Conversion Rate. I’ll talk to you in the next episode. Take care.
|About Mitchell Harper
Mitch is a 7x company founder, advisor and investor. He is best known as the co-founder of BigCommerce. His companies have generated over $200,000,000 in total revenue and he is currently building an online education company and a SaaS company.