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June 24, 2005

"How to Use Guarantees to Increase Sales" by Michel Fortin

While the greater portion of my career has been in business development consulting and speaking, I have spent many years in direct marketing and several years on the Web.

My favorite "guru" is Dan Kennedy, dubbed "The Millionaire Maker." And if there is one lesson that he teaches from which I derive the most profitable results in my direct marketing efforts, one of many from a system he calls "Magnetic Marketing," is the awesome power behind the use of guarantees.

If you offer a product or service without a guarantee, you're losing a great percentage of potential sales. Obviously, the Internet has opened many doors, including those to many unscrupulous entrepreneurs. Scams and snake oils are rampant. Since there is no official police or watchdog on the Internet, such scams are probably even greater as a result. I would even venture as to say that millions of dollars are lost to these scamsters each month.

Guarantees Increase Sales
While there are many regionally accredited entities and watchgroups, it doesn't stop many a crafty entrepreneur to bypass the systems to sell their wares. CBC Radio International news recently reported a scheme in which a weight-loss drug not yet approved in Canada is being sold by a Canadian entrepreneur on the 'Net. The matter is currently under investigation by the pharmaceutical manufacturer and Canadian health officials.

Nevertheless, because of these tricksters and the multitude of challenges presented on the Web, people are leery and will increasingly seek out more secure means to benefit from offers. Guarantees are therefore powerful tools for the prosperity-seeking marketer and can do two very important things that will help grow one's profits: Increase sales and reduce returns.

When you offer a guarantee, you reduce the skepticism around the purchase of your product or service. Consumers are understandably cautious and more so when making purchases via the web. And guarantees give you an almost instant credibility with potential customers. For example, if you have a professionally-looking Web site, an ethical sales approach, and even a proven product or service, the lack of a guarantee will still, particularly on the Internet, cause most prospects to perceive your offer as questionable in the very least.

Guarantees Increase Perceived Value
Chris Ayers, publisher of Unlimited Traffic!, gives an astonishing real-life example. Writes Ayers, "One of my first direct mail products years ago was a self-study program. When I first offered the program in a magazine, my sales weren't even enough to cover the cost of the ad. I changed my ad and sales letter to include a guarantee. The number of responses to the same ad increased by a factor of 20 and my conversion rate from my sales letter rose from 10% to almost 40%."

Take for instance the story of the Monaghan brothers. The two ran a small business in order to pay their way through college. While one worked the day shift in order to attend school at night, the other did the converse. After about a year in the money-losing venture, one of the brothers sold his share of the business for a beat-up old car. The other, however, with a good dose of stick-to-it-iveness, decided to make something of his fledgling pizzeria.

According to some interviews he recently gave, Tom Monaghan said that, at the time, he wasn't quite sure that his decision to put a guarantee on his pizza delivery would change much. But obviously, history tells us that his decision was the greatest one he ever made. By simply marketing the strength of a guarantee, i.e., "Pizza delivered fresh in 30 minutes or it's free," Domino's Pizza became the multimillion dollar franchise operation we know today.

Guarantees Reduce Returns
Guarantees will increase sales. And the stronger the guarantee, the larger the increase. But unbeknownst to many marketers, one of the most important benefits of using a guarantee is the fact that it can actually reduce returns. According to certain successful marketers such as Ayers, a strong guarantee results in fewer returns. For instance, Ayers got fewer returns with a 90 day guarantee than he did with a 30 day guarantee. Others got fewer returns when they offered to let clients keep some bonus items if the product was returned.

The parallel obviously dictates. While people order, especially from the Web because of the convenience it offers, an offer that provides a no-hassle return policy (or risk-free promise) adds to the convenience factor and instills a greater confidence in the buyer's psyche. If you offer a product or service, find ways to offer a guarantee along with it. Rather than taking a risk by removing it from your potential clients' decisions, you will likely be decreasing it.

In other words, use guarantees to guarantee your success.

Posted by isoh at June 24, 2005 05:37 PM

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