Category Archives: marketing

Should you offer a money back guarantee?

money back guaranteeA few weeks ago I was going to buy a digitizer tablet for my PC. Then I noticed in the vendor’s terms and conditions that they wouldn’t accept a return once I had opened the packaging. But I couldn’t know if the tablet works until I open the packaging. Duh. I didn’t buy it. Similarly I look for a sensible money-back guarantee whenever I buy software. I don’t remember ever invoking such a guarantee for software, but it is nice to know that I could if I wanted to. Also, I see the lack of such a guarantee as a warning signal that the vendor isn’t confident about the quality of their product.

I offer a 14-day money back guarantee on my own Perfect Table Plan software. The only provisos are:

  • They have to tell me what they didn’t like about my software. This is very useful feedback for me.
  • They have to email me that they have uninstalled the software and won’t use it again. I have no way of checking this, but I want them to be clear in their own mind that they are a liar and a cheat if they carry on using it (if you have read Ariely’s excellent ‘Predictably irrational’ you will know that many people are prepared to be a little dishonest, but few will lie and cheat outright).
  • They have to return the CD, if they purchased one.
  • The guarantee is only valid for 14 days.

But I am fairly relaxed about about all of these. If it is clear that someone thinks they haven’t got their money’s worth out of my software, I will pretty much always give them their money back.

Note that is isn’t a ‘no questions asked’ money back guarantee. I haven’t been quite brave enough to try that yet and really want feedback on why they didn’t like my software. Also the 14 day guarantee is shorter than most. The reason is that a lot of people buy my software for a single use (e.g. their wedding reception) and I don’t want to make it too easy for them to use the software and claim a refund after they have finished with it. However I have heard vendors say that their refund rate actually dropped when they extended the length of their money back guarantee (due to increased procrastination, perhaps). I may test switching to a ‘no questions asked’ and/or longer guarantee period at some point.

The advantages of a money back guarantee to the vendor are:

  • More sales. If they customer is confident they can get their money back they are more likely to buy. I don’t have any numbers to back this up, as I have always had a money back guarantee. But I know I am considerably more likely to buy if there is a money back guarantee. Aren’t you?
  • Less chargebacks. If a customer buys with a credit card they can get their money back anyway. They just have to ring their credit card company and do a chargeback. Your payment processor will then take the payment back and, to add insult to injury, slap a chargeback fee on top. Too many chargebacks and they might even close your account. Better to refund and avoid the chargeback fee.
  • Less bad vibes. No matter how great your software is, some people aren’t going to like it. Maybe your software isn’t a good fit for what they want to do. Maybe they are just having a bad day. Better to give them their money back than to have them bad mouth your product on every forum they can find.
  • Less bad customers. Some customers (thankfully very few, in my experience) cost more in time and mental energy than their licence fee is worth. It is better for you to cheerfully refund them and focus your efforts on more financially and psychologically rewarding customers.
  • Staying legal. You may be legally obliged to give a refund in some circumstances.
  • Good karma. If you aren’t happy, I really don’t want your money.

Generally it costs you nothing to refund a software purchase, apart from a few seconds of your time (depending on your payment processor, some may not refund the processing fee). The only disadvantage of a money back guarantee is that it makes it easier for a customer to cheat you. A lot of vendors worry about this, but in my experience (and of others I have spoken to) this isn’t much of an issue in reality. My refund rate has been consistently around 0.5% (I am not including cases where I refunded because people bought the wrong type of licence, bought 2 licences instead of one etc.). I would be very surprised if dropping my prominent money back guarantee didn’t also drop my sales by a lot more than 0.5%. So, even if all the refunds are fraudulent (which I very much doubt) I am confident that the refund policy increases my profits overall. Sufficiently confident that I don’t intend to run an A/B test any time soon.

Interestingly, my refund rate is 10 times lower amongst customers who have purchased a CD. This could be because these customers are less price sensitive and so don’t see the refund as worth their precious time. Or it could be because of the extra hassle of having to send the CD back (I know a wily B2B vendor who includes a CD with every purchase for exactly this reason). Probably it is a combination of both.

Some vendors think that they don’t need a refund policy if they have a free trial. I don’t agree. When I buy software I want a free trial AND a money back guarantee in case I only discover a problem after purchasing. Also I know (from a survey) that some 25% of my customers don’t even try the free trial of my software before they buy. I expect I would lose a lot of these sales without a money back guarantee.

I think the case for a money back guarantee is even stronger for B2B software. Customers buying B2B software typically aren’t spending their own money, so they are probably less likely to ask for a refund. Especially as this would mean admitting to their boss and peers that they made a mistake buying your software in the first place. Certainly I have a lower refund rate to businesses than to consumers.

From a business point of view, I think the only case where you can justify a no refund policy is when you have a high cost of sale, e.g. enterprise software that requires a lot of configuration. In that case you could include a non-refundable set-up fee that covers your costs, but still have a money back guarantee on the remainder of the purchase.

No doubt refund rates vary according to product type, price range, customer demographics, geographic market and a range of other factors. But , reading forums and talking to other vendors, the typical refund rate seems to be in the range 0.1% to 1%. If your rate is much above 1%, perhaps there is a problem with your product you need to address? If your rate is much less than 0.1%, perhaps you aren’t marketing your product aggressively enough?

In the early days I found it hard not to see refund requests as an insult to my product. But now it really doesn’t bother me and I cheerfully make the refund. I just add the key to a ‘blacklist’ in the software so it won’t work in any future releases.  I don’t attempt to disable it in the current release. I don’t see implementing a ‘phone home’ strategy to make this work as being a profitable use of my time.

In summary, by not giving a money back guarantee you might avoid a small number of customers cheating you. But I think you are very likely to be losing a lot more in chargebacks, missed sales, ill will and missed feedback than you save in fraudulent refunds. Try it. You can always revert back in the unlikely event that your refunds go up significantly more than your sales. And if you have a money back guarantee you should shout about it on your website. Having a money back guarantee and not advertising it prominently seems like the worst of all worlds to me.

Interview for Shareware Radio

Mike Dulin has just uploaded an MP3 of an interview we did at SIC 2009 for Sharewareradio.com. In the 15 minutes we discuss marketing, how I got started with PerfectTablePlan, ads, the wedding industry, newsletters, the ASP, this blog and more. There are some problems with the recording levels, but hopefully that doesn’t detract too much.

New links page

I have put together a page of categorised links to blog posts and articles that I think might be useful to developers and marketers of commercial software in general, and microISVs/indie developers in particular. I intend to add more links from time-to-time. My rules for inclusion are secret, arbitrary and capricious, so please don’t ask to have your link added.

Marketing for microISVS

Below are the video and slides of the “Marketing for microISVS – embracing the ‘dark side’?” talk I gave at ESWC 2009 in Berlin. This is a high-speed ramble through a vast subject. In the 45 minutes available I do my best to dispel some of the myths software developers have about marketing and discuss some marketing concepts, including: branding; positioning; pricing; and segmentation. Taking in Harley Davidsons, tinned tomatoes, Coca Cola and food blenders on the way. The first couple of minutes, where I dispel the myth that good software sells itself without marketing, are missing from the video due to a dead camera battery. But you knew that anyway, so I don’t think this detracts much overall.

Video:

Slides (which might not make much sense without the video):

NB/ When I said 47Signals, I meant 37Signals (brand inflation?). Thanks to Tarek for the correction.

Links to some of the things mentioned in the talk:

A big thank you to Alwin and Sytske of collectorz.com for hot-footing it from Alwin’s talk to do the video (you can see Alwin’s excellent talk on web app pros and cons here). And also to David and Panagiota for all the hard work that goes on behind the scenes organizing ESWC.

If you found this talk useful you might also like 10 mistakes microISVS make.

microISV reading list

I have added a microISV reading list page to this blog. Please feel free to add your own comments to the page on the books listed or any other books you feel are relevant.

Off to ESWC 2009

marketing for microisvsI will be off to ESWC 2009 in Berlin in a few days. I am doing a talk “Marketing for microISVs – embracing the dark side?” on the Saturday morning. It is going to be tough to tackle as huge a subject as marketing in 45 minutes including questions, but I like a challenge!

I am also looking forwarding to touching base with old acquaintances and meeting some new people. If you are going to there, do come and say hello.

Apple resort to FUD marketing

Apple have resorted to ugly FUD marketing in their latest ad. This seems a bit rich given that Mac OS X 10.6 has a bug that can delete all your user data.

The art, science and ethics of software box shots

Perfect Table planI have recently revamped the PerfectTablePlan payment pages. I asked Andrew Gibson of 3d-box-shot.com to create an image of the PerfectTablePlan packaging, using the existing artwork. I was very impressed with the result. The image is much cleaner and more aesthetically pleasing than I could have achieved by photographing the physical packaging. But I am much less keen on the practice of using box shots of software where is no box (i.e. download only). It seems disingenuous, at best.  Andrew kindly agreed to write a guest article for this blog with an insider’s view on the art, science and ethics of software box shots.

Almost every time the subject of box shots is raised in any sort of software marketing forum, opinion seems to split diametrically in two opposing camps. The first group don’t see any ethical problem with displaying a box shot for a “download only” product. The typical argument used in favour of box shots is that it makes a product appear more tangible to consumers. They can see what you’re selling without having to read about it. It removes any doubt that the site they are looking at has software to sell and, when used effectively, can add an air of professionalism to a site. Finally, there’s a widely held belief that because of this, displaying a box shot can improve conversion rates.

In contrast, the opposing group believe that displaying a box shot for a “download only” product is ethically wrong and fundamentally dishonest. They maintain that customers would complain about not receiving a physical package in the post that’s identical in every respect to the “bogus” box shot displayed on the website. I run my own Micro ISV, selling amongst other applications, a product called 3D Box Shot. As a result, you might be inclined to think that I fall into the first camp. However, I’m actually quite ambivalent about the issue. I use box shots on some of my sites and have never received a single complaint from a customer about them not receiving a physical product in the mail. However, consumers in different markets don’t all behave the same way, which is why advice that works for some ISV’s can be commercial suicide for others. I’m entirely willing to accept that in some markets, some customers may indeed complain about not receiving a physical product. I just haven’t experienced this first-hand.

It’s worth noting that existing users of your product can often be persuaded to purchase additional copies to give as gifts. They may not even make this connection themselves, so why not put the thought in their heads? Send a festive email offering to ship additional physical copies of your products (gift wrapped) to friends and relatives. Add something like the following to your site to make the point visually:

selling-software-as-a-gift

click for a larger image

It’s often stated that adding a box shot to your site can dramatically improve conversion rates for your products. It may come as a surprise to learn that I’m not convinced that this is true in all cases. Generally speaking a box shot isn’t some sort of magic bullet that will transform your sales overnight. However, if it is an integrated part of your marketing strategy then it can make a real difference.

So how do you go about integrating a box shot into your marketing strategy? From a design perspective you can integrate a box design by keeping everything visually consistent. Use your company and product logo on the box and clearly display your website URL as well. This will help to increase the marketing potential of your box shot.

One less obvious method is to add you box shot to the image for your PAD Screenshot. Most download sites are worse than useless when it comes to driving traffic to your site. So instead of thinking of the screenshot referenced in your PAD file as just a screenshot, think of it as a blank advertising canvass that thousand of download sites are happy to display for you free of charge…

PAD-Screenshot-replacement

click for a larger image

Using this method, you can attract visitors to your site even from low quality download sites that don’t even supply a link back to your website.

So how do you get a box shot designed? As a designer I have a fairly unique approach to software box design. I treat a design as a conceptual puzzle than needs to be solved in order to create an effective cover. The criteria I use are simple. Someone needs to be able to look at the box shot and immediately understand what the product is and does. If a box doesn’t meet this challenge, then it isn’t doing it’s job. It’s normally possible to create an effective visual metaphor for a product that explains visually what it’s all about. Here are some examples of the sort of designs I’m talking about:

Example-Designs

click for a larger image

Trends in box design can change. Not so long ago lots of people were asking for Windows Vista Style boxes, but as it became more apparent that Windows Vista was destined to be seen in the same light as Windows ME, this requirement has tailed off. Nowadays the vast majority of design jobs that I do are for DVD cases, both virtual box shots and full print insert designs.

If you’re artistically talented and have access to a good quality image editing tool like Adobe Photoshop and have an easy means of transforming your 2D designs into a 3D Box, then you may well be able to create an effective looking box shot yourself.  However, once you consider the time this takes, hiring a designer seems a lot more reasonable. Since I design boxes commercially, I’ve acquired a lot of design resources including hundreds of royalty free vector images and a library of stock photography. I can draw on these resources when I’m creating a box design. This lets me develop designs quickly through the draft stage through towards the final design. However, as an experience box designer, I still find it challenging and rewarding work. But it is very time consuming.

If you’re determined to “do it yourself” then bear the following points in mind:

  1. The box shot needs to visually show what your product is and does. Show your design to someone that’s never seen your product and ask them to tell you what your product does. If they can’t do this, then your design isn’t up to the job.
  2. Make sure your website address is clearly visible on the box shot. If you ship a physical package you’ll have no way of controlling where it ends up. The box itself can drive traffic to your website. You don’t have to slap it on the front of the box, just make sure it’s there and can be seen.
  3. Try to design a cover that fits with the look and feel of your website. Use the same (or at least, non conflicting) colour scheme as your site and try to use the same fonts. This will prevent your box shot from standing out on your site like a sore thumb.
  4. Never use more than three different fonts in your design. Unless you are selling a font management application, this is sure way to spoil any design.
  5. Design so that text is still visible when the box is reduced to a 250 x 250 thumbnail. If the text is legible at this size on your design, then unless the design carries the message all by itself, the box won’t work very well as a marketing tool.
Perfect-Tableplan white background

click for a larger image

The image above was created in a rendering application at very high resolution. It took around 6 hours to complete on a dual core system. The resulting image is big enough to be used in print ads, or can easily be resized for use on the web.

Andrew Gibson is the head developer and lead designer for www.3d-box-shot.com, provider of box shots, packaging design, e-book covers and more. Box shot images from scratch start at $100. Box shots images from existing artwork can be created for as little as $25. All the images in this article were created by them. The original PerfectTablePlan packaging was designed by Nicola and Adrian Metcalfe.

Ten mistakes microISVs make

Here is a video of the “Ten mistakes microISVs make” talk I gave at the Software Industry Conference 2009 in Boston. Total duration: 27 minutes.

The slides aren’t terribly easy to read, due to the resizing and compression of the video. But you can also download the paper and slides:

A big thank you to Alwin and Sytske of collectorz.com for doing the video. You can read Alwin’s excellent software marketing blog at alwinhoogerdijk.com.

Feel free to embed this video, as long as you include a credit and a link back to this blog.

How many of these mistakes have you made? How many are you still making?