January 4, 2019
Playing with guarantees
Sent by Jonathan Stark on January 5th, 2019
Offering some sort of guarantee to your potential clients is a great way to immediately differentiate yourself from your competitors and justify premium pricing overnight.
When thinking about offering a guarantee, you need to ask yourself three questions.
1. What do they fear?—Different clients are going to perceive different sorts of risk from your offer. You could make any one of these fears the focus of your guarantee. For example, you could guarantee results or satisfaction or effectiveness or quality or professionalism or dozens of other things.
Understanding what your potential clients are worried about when thinking about giving you their time and/or money will help you decide which would be the most effective at allaying their fears. The bigger the fear, the stronger your guarantee.
2. What is the remedy?—What do you promise to do to “make it right” if the thing that your buyer was afraid of does come to pass and they decide to invoke your guarantee?
The nature of the remedy will depend heavily on what the product or service you’re selling is. Ideally, you want to offer a remedy that is attractive enough to the buyer that it will completely turn their dissatisfaction around, perhaps even delighting them.
For things like books, ebooks, videos, and even productized services, a 100% money back might be enough to satisfy the buyer. For a two-day workshop, a free retake might be satisfactory. For a physical product, a free replacement might do the trick.
Note that when it comes to long-term service offerings like custom software projects that require a lot of client collaboration, a money-back guarantee might not be enough appease the buyer - e.g., “I don’t want our money back... I just want the damn thing to work!” Finding the right remedy for the situation comes from having conversations with your buyers.
One last thing about remedies:
Obviously, whatever remedy you offer will take some sort of toll on your business if invoked. This is where the risk of offering guarantees comes from and why you must charge a premium for doing so and should spread your risk out across multiple clients.
3. How simple is it?—How easy is it for a client to invoke your guarantee? On the “most simple” end of the spectrum, you could offer an “unconditional lifetime no-questions-asked guarantee” on whatever you have promised to deliver. A guarantee like this makes me think of brands like LL Bean, Nordstrom, Tilley, and Bugs Burger Bug Killers.
The more asterisks you add to your guarantee (i.e., conditions and limitations) the more complicated it is to invoke and the weaker it gets. Highly conditional guarantees like this make me think of wireless carriers like AT&T, Verizon, and Sprint. Yuck.
Fear + Remedy + Simplicity
So... we have three dimensions on which to consider the strength of a guarantee:
- Intensity of the client’s fear
- Attractiveness of the remedy
- Simplicity of the invocation
If your guarantee rates highly on all three of these dimensions with a given buyer, then it will be very persuasive. It will allow you can charge a high price premium. On the other hand, if your guarantee is weak in some or all of these dimensions, it will be less effective.
As an exercise, brainstorm a number of different guarantees for one of your offerings. Play with the intensity of each of these three dimensions. I betcha you’ll find one that could work to increase your prices, at least a little.