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Guarantee vs. Risk Reversal

by stanigator
12 replies
I tried to find resources describing the tradeoffs between each of them.
I'm trying to figure out which one I should be using.

Does anyone here recall a resource or discussion re: when to use what?

Thanks in advance!
#guarantee #reversal #risk
  • Profile picture of the author Steve The Copywriter
    I'm sure others will tell your their view.

    Mine is risk reversal wins - every time.

    On every product or service.

    I don't have any "resources" - but many "gurus" rave on about it.

    I think it was Jay Abraham who was credited for "creating" it.

    Although I've seen it used in Ads in the 20's and 30's.


    Steve
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    • Profile picture of the author perryny
      In an interview of Jay Abraham by Tony Robbins available here: Tony Robbins Interviews Jay Abraham, Jay explains Risk Reversal in detail. I believe this part of the discussion is in part 2 of the interview.
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      • Profile picture of the author perryny
        I pulled this from the transcript of the interview, which is abbreviated from the actual audio:
        TR: That leads me to a very important concept. Let's talk about risk reversal.
        How important is that? What is it -- and how can virtually any business use it to see an
        improvement in their ability to bring customers to the table initially and then apply it in
        the future?

        JA: First of all, how important is it? Do you want to stay in business, be competitively
        superior and be obscenely wealthy and successful? In any business or any life encounter,
        one side of the transaction is always being asked to assume all or more of the risk then the
        other. It may be done explicitly, implicitly -- it may not even be consciously done but in
        every transaction it occurs. To the extent you can acknowledge this fact and eliminate,
        reduce -- or even make better than risk-free the transaction on the part of the prospective
        customer -- you own the business. Let me give you an example because it's from the 19th
        century and it's a wonderful little story. A man wanted to buy a horse for his daughter.
        There were two horses for sale. One man said to him, "Buy the horse, take it home, and if
        you don't like it, bring it back and I'll give you back the money." The other man, who
        understood risk reversal said, "My horse is kind, gentle and good. Why don't we do this? Let
        me bring the horse to you, let your daughter ride the horse for 30 days. I will even bring you
        the oats for the horse. At the end of that time, you decide whether the horse is suitable for
        your daughter. If it is, I will come then and ask to be paid, If it is not, I will come then and
        take it away." Now which horse would you buy?
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        • Profile picture of the author marciayudkin
          The other man, who
          understood risk reversal said, "My horse is kind, gentle and good. Why don't we do this? Let
          me bring the horse to you, let your daughter ride the horse for 30 days. I will even bring you
          the oats for the horse. At the end of that time, you decide whether the horse is suitable for
          your daughter. If it is, I will come then and ask to be paid, If it is not, I will come then and
          take it away."
          You will find very few companies online offering this kind of risk reversal - ie, no commitment at all up front, no credit card taken, even - because when there is no face to face interaction, it is way too risky. Note that in the quoted example, the face to face nature of the offer is undoubtedly an important element, as is the fact that the buyer and seller probably live in the same community. Without those elements, you'll get taken advantage of too many times, from what I've observed.

          Marcia Yudkin
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          • Profile picture of the author stanigator
            Originally Posted by marciayudkin View Post

            You will find very few companies online offering this kind of risk reversal - ie, no commitment at all up front, no credit card taken, even - because when there is no face to face interaction, it is way too risky. Note that in the quoted example, the face to face nature of the offer is undoubtedly an important element, as is the fact that the buyer and seller probably live in the same community. Without those elements, you'll get taken advantage of too many times, from what I've observed.

            Marcia Yudkin
            Hence why another reason I'm struggling between these choices.
            I know which choice I'm going to pick up-front - the guarantee.
            If I make the initial offer free rather than a figure that's not really expensive but high enough of a commitment that they don't bail, I would attract a lot of people who would say "yes", and then bail to politely blow me off, when I would be taking substantial financial and time risk as well.
            I may test it out with risk reversal later on, but I posted the question here to see if there's a tradeoff comparison out there.
            Maybe I'll search harder in MarketingExperiments.com.
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            • Profile picture of the author wordwizard
              I'm wondering if WhichTestWon.com has a test on that one...

              Or on various types of guarantees? That would be interesting to see.

              And yes, there'll probably also be a difference between virtual and physical products - and services too.
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  • Profile picture of the author Steve The Copywriter
    Jay's example would be very risky online.

    To be fair you don't buy that many horses on the web.

    And you don't have to follow a guru's advice to the absolute letter.

    You can develop good RR online (which will pull a better response than an ordinary "guarantee") without being left high and dry.

    And without the horses bolting.


    Steve
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    • Profile picture of the author perryny
      Originally Posted by Steve The Copywriter View Post

      Jay's example would be very risky online.
      I feel like I see this online often.

      If I understand Jay's example, the guarantee is "Buy the horse, if you don't like it, I'll give you your money back."

      Risk Reversal is, "Take the horse. If you like it, pay me. If you don't, give it back."

      This isn't too far off from "Download the materials, watch the videos, play with the software ... but pay nothing now. If you like it, in 30 days we'll automatically bill your credit card for the first monthly installment. If you don't like it, tell us to bugger off. But keep the materials as our gift."
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      • Profile picture of the author marciayudkin
        Risk Reversal is, "Take the horse. If you like it, pay me. If you don't, give it back."

        This isn't too far off from "Download the materials, watch the videos, play with the software ... but pay nothing now. If you like it, in 30 days we'll automatically bill your credit card for the first monthly installment. If you don't like it, tell us to bugger off. But keep the materials as our gift."
        Nope, there is a tremendous difference. In Jay's example, the customer does not provide a credit card or anything. This is hugely different from having to give your credit card online to get in on an offer where you may not be charged. In your example the seller has something they can use to get payment, and has some form of commitment from the buyer. In Jay's example, the seller has nothing from the customer and no implicit or explicit commitment from the buyer.

        This is really crucial, and it's why we don't see very much risk reversal comparable to Jay's example online.

        Marcia Yudkin
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        • Profile picture of the author perryny
          I understand the difference.

          But in both cases, the seller is letting the buyer try the product without spending any money up front. As such, a large layer of risk is removed from the buyer's side, increasing the chance of making the sale.

          And if you ask me, the buyer of the horse is making a much larger commitment to the seller by taking that horse home, than the buyer of the digital product who trusts that he won't be billed if he cancels within the trial period.
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  • Profile picture of the author sethczerepak
    Originally Posted by stanigator View Post

    I tried to find resources describing the tradeoffs between each of them.
    I'm trying to figure out which one I should be using.

    Does anyone here recall a resource or discussion re: when to use what?

    Thanks in advance!
    Maybe this is just a semantics things, but I prefer to think of it as a safety net. I make a promise (guarantee), AND I offer to do something outrageous if the product doesn't live up to the promise (risk reversal). Like this...

    If [PRODUCT NAME] Doesn't [PROMISE] in [TIME PERIOD OF PROMISE], I'll Refund Your Payment AND Mail You a Check for $100.

    One of the most common things I see newbies do on sales pages for information products is use a money back guarantee as a "Safety net." It's not. Everyone is doing that and you can't give the person their time back OR make up for the feeling of disappointment.

    In my opinion, the test of a good safety net is that the customer should read it and think: "There's no way this company could stay in business if they had to do this on half of their orders..."
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  • Profile picture of the author Steve The Copywriter
    So, if I was trying to flog a dead horse on the interweb.

    (But Steve, that would be like 9,700 billion other sites)

    What I mean is, selling my thoroughbred horse on the net.

    I would probably use Jay's example.

    Because I would be taking the oats round every day.

    So I know where the nag is.

    And my hope would be after a month the new "owners" would be so besotted with the beast they have to do the decent thing and cough up the money.

    Bit like the old style "takeaway" close.

    Also known as the "puppy dog" close - but with a horse.


    Steve
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