Risk reversal is a powerful, underused marketing tactic that can help you close more sales. This blog post covers the basics of risk reversal and provides practical strategies for implementing several types of guarantees in your business.
In today’s competitive business environment, offering a quality product or service is not enough. You also need to find ways to effectively communicate its value and reduce the perceived risk of purchasing for potential customers.
This is where the concept of risk reversal comes in.
Risk reversal reduces the uncertainty around making a purchase. It is also a way to increase customer confidence and trust in your product or service.
This marketing strategy taps into the fundamental human need for safety and security, making it a powerful motivator for consumer behavior and an effective tool for driving sales growth.
According to Maslow’s hierarchy of needs, safety and security is the second most important physiological requirement. As such, people pay more when you can meet this need.
Understanding the Power of Risk Reversal
About a year ago, I had a client who offered his customers a rather standard “2 Week – 100% Satisfaction Guarantee” for his product.
In addition to a number of marketing strategies that we deployed, one of the first things we did was to enhance his product guarantee.
First we changed it to 30 days … then 60 days … then 365 days … then 365 days PLUS double your money back performance guarantee!
We tested many variables. (The key is to TEST each variable one at a time to determine what’s going to work best for you!).
And the more liberal we got with the guarantee, the BETTER his sales!!
In fact, it’s not uncommon for companies to DOUBLE or even TRIPLE sales once they deploy risk reversal.
It’s one of the easiest strategies to test … and one of the fastest ways to grow your profits!
Let’s face it, your customer makes buying decisions based on two factors:
1. The degree to which they believe that your product or service will solve their problem (and they will be better off for having worked with you) or,
2. The level of risk (monetary, likelihood of getting a result, ease of use, level of satisfaction, etc.) associated with buying the product.
The first part of the equation has everything to do with your marketing, how well you articulate your message and your differentiation factor (otherwise known as your unique selling proposition).
The second part of the equation is directly correlated with your guarantee and your ability to REVERSE your customer’s risk.
If you can reduce or even totally eliminate their risk in doing business with you, then converting your prospect into a buyer is exponentially easier!
You make it easy for them to say ‘YES!’ to doing business with you and, like music to your ears, your sales will increase almost instantly!
Digital marketing solutions are all the rage these days, but is direct mail marketing still an effective strategy in an increasingly digital world? Find out in our related piece on direct mail marketing.
The Three Ways to Reduce Risk
1. Money Back Guarantee
The most common form of this type of guarantee is the ever-so-popular “30-day money back guarantee.”
Though, this is a good start (average at best), an even stronger guarantee would be a 45-day, 60-day, 90-day, 1-year, or lifetime guarantee.
In fact, the longer you extend the guarantee, the chances are your sales will increase and your returns will decrease!
“If you invest in our program, we’ll give you a full 60-days to put it to the test. If you don’t feel that the marketing strategies you’ve learned in this course aren’t worth at least DOUBLE what you paid for it, than call my office and demand an immediate refund.
We wouldn’t dream of keeping your money if it didn’t produce the results you were hoping for.”
That’s more compelling than the “30 Day Satisfaction Guarantee.” Yes?
And, the stronger you make your guarantee as compared to your competitors, the more you will dominate the market and make your competition completely irrelevant!
2. Better-Than-Money-Back Guarantee:
This simply states that if you’re not completely satisfied with your purchase, not only do you get your money back, but you also keep a bonus incentive just for trying it out.
You may have seen this approach in infomercials.
“It’s only 5 payments of $29.95 and you have a full 60 days to try it out. If this isn’t the best stain remover you’ve ever owned, send it back and you can keep the mini vacuum absolutely free!”
Why do you think they make these types of offers?
Because they work.
And the increase in sales largely compensates for any customer who does take advantage of the guarantee.
(Disclaimer: Your product DOES have to work. Otherwise, everyone will return it!)
You could offer any sort of free gift, special report, information, etc. Creativity wins this game.
3. The Emotional Guarantee
This works when it’s not practical to guarantee results with a money-back guarantee (like in the case of a medical professional, consultant, real estate agent, accountant, or lawyer, for example).
In this case, consider giving them “results in advance” – such as a free initial assessment or free service audit.
The whole point of the emotional guarantee is to reduce the fear of doing business with you and increase a prospect’s confidence in you … making it easier for them to say “yes” when it comes time to pull out their wallets.
Are you tired of launching bad digital marketing campaigns that fall flat? Read more about creating an effective marketing campaign (and fixing any mistakes you might have).
Bonus: The Monkey's Paw Strategy
One of the more powerful concepts I learned when I started my business was The Monkey’s Paw Strategy.
Since then, the Monkey’s Paw has opened the door for both me and my clients to generate millions in sales that we may not have otherwise enjoyed.
If you sell high-ticket products and services – watch this video to see how you can reduce buyer’s risk, increase conversions and boost sales (without discounting).
With the Monkey’s Paw Strategy, a business can demonstrate that they are customer-focused and value customer satisfaction above all else.
The Key Takeaway: Increasing Sales with Risk Reversal
Remember, the better the guarantee, the stronger the message to your customer. You are proving your confidence in your product/service. So much so that you’re willing to stand behind it with an iron-clad guarantee.
Setting suitable objectives and identifying strategies or opportunities are vital to business growth. Nevertheless, you must turn your ideas into actions to achieve your goals. Read about tactical planning in this related piece.
Conclusion: A Final Word on Increasing Sales with Risk Reversal
The key to remember is that, though risk reversal can seem intimidating, experience and studies show time and time again that reducing or eliminating your clients’ risk increases sales beyond what you might experience in refunds.
Take a sample of your prospects and test a risk-reversal guarantee. See how much your sales increase.
Let us know what type of guarantees you come up with in the comments below.
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