One of the most important things to consider when starting your own business is your legal obligations. There is more to running a business than just thinking up a business name and getting it registered with your statutory authority.
You also must ensure you’ve got the proper computer business documentation in place to help protect you and your business. One policy that you should give serious thought to is a refund policy. Not only is it legally required in many areas, but it also gives your customers the peace of mind that you run a friendly and reliable computer business.
So how do you know exactly what to include in your refund policy?
Laws of the Lands
In the majority of cases, depending on where your business resides, the decision on how your guarantee works may be out of your control.
Take for example, Australia, where I reside and my business operates. In Australia we have Australian Consumer Law. It states that consumers are entitled to a refund, repair, or replacement, if goods are faulty. If it is a minor fault, the decision of either refund, repair, or replacement is in the hands of the business. If it is a major fault the decision is made by the consumer.
Recently, Apple was caught out by Australian Consumer Law. Apple used to require dead on arrival (DOA) devices to be returned to Apple directly, and customers had to wait weeks for a replacement for an item they had just purchased. Following intervention from the Australian regulatory body, Apple DOA devices can now be returned to the store where they were purchased for replacement, or refund immediately. The store is the place of purchase so they are the ones who are responsible.
For computer businesses, that means that you cannot put the onus upon the customer to go back to the manufacturer. The responsibility lies squarely with the computer business.
The European Union has similar laws. One such law says all on-line purchases have a 14 day cooling off period from date of receipt, and on-line businesses are responsible for the cost of return postage in the case of repairs or faults.
It is also illegal in Australia to display a ‘No Refunds’ sign, message, or policy. Recently, online games retailer, Steam, has been caught out and they do not even have an office in Australia. The Australian Competition and Consumer Commission, ACCC, is currently taking court action against Steam’s ‘No Refund’ policy as they sell to Australians. The Australian law applies whether it is a product that was purchased or a service.
In other countries, different laws apply and they can vary depending on if it was a product or a service, or if it was sold to a consumer or a business. In the U.S.A., consumer law can differ from state to state. Some countries even define the length of warranty that must apply.
In Europe there may be a 2 year minimum. In Australia, the length of the warranty depends on how long a ‘reasonable person’ (read reasonable consumer) would expect an item to last. For example, a custom made ‘cheaper’ PC might be expected to last, say, 3 years, while a high end more expensive brand name computer would be expected to last at least double that.
How long would you tell your customer that your computer business’ custom built PC would last without fault? That’s at least how long the warranty should last in Australia, and it is illegal to inform the customer otherwise. An example is an Apple iPhone which is warranted in many other parts of the world for 1 year only, but in Australia it must be warranted for 2 years, and possibly even longer.
Ignoring these laws can expose your business to heavy financial penalties, as well as negative publicity. Negative publicity is the death knell of a business. One local store was fined $32,000, for stating on receipts that, “No claims will be honoured on damaged goods unless notified within 24 hours of delivery or pick-up”.
Generally, as a business person you only need to be aware of the law of the territory that you operate in. However it pays to either be aware of the law in the state & country that your customer is in, or only deal with local customers. Laws also vary, not just country to country but also from state to state and sometimes extend beyond borders.
Why Offer a Refund Guarantee?
Whatever the law is in your area, from a customer point of view, a business that has a favourable guarantee displayed openly, especially on its website and marketing documentation, demonstrates that it is a professional business which cares for its clients in the long term. Having this guarantee is not going to prevent you from doing extra repair work, but it might be the deal clincher for your next sale.
When shopping recently for a new piece of tech, I visited two local stores. One store offered an ‘all sales are final unless faulty’ type of condition. The next store said that the item they recommended would do the job, and if not bring it back and they would refund it. Even though they were more expensive they got my money.
Knowing what guarantees you are required to make by law will help you in the price planning of your business. If, for example, a business knows that it must warrant a computer for 3 years, then only making $100 to $150 on the build might not cover a future warranty repair.
My Personal Experience with Refund Guarantees
In my own business I have always offered a full money back guarantee. In 19 years, no one has asked for their money back. There have been a few occasions when I have taken the initiative in a difficult situation and offered a client their money back, and it has never been accepted.
One occasion that I recall was with a Windows 3.1 computer that was doing weird things. I arrived on-site and was shown the problem. I fixed the issue, or thought I had, rebooted several times and it never recurred. I called the customer into the room and demonstrated the fix from boot. They were happy, and wrote a cheque.
About an hour later the customer called and left a message that the problem was back, and all they had done was turn the computer on. I returned the call and let them know I could be back with them in 1 hour. When I arrived the first thing I did was take the cheque out and give it back to the client. I said I am willing to have another try to fix it, but I don’t want you to pay me now, rather mail it to me when you are satisfied that it is repaired. As a result of the trust I showed the client, I received more work from them as well as many good recommendations.
The other occasion that springs to mind was when I was quoting for a large database programming job. As always, I included a full money back satisfaction guarantee in the quotation. The quotation went up the chain of management, eventually landing on the I.T. Managers desk.
When I finally received the purchase order, not only did it have the job reference on it, but the I.T. Manager had hand written, “with money back satisfaction guarantee” on it as well. I cannot say if I was awarded the job because of the guarantee, but it certainly made an impression with the I.T. Manager.
It is worth the extra time and effort it takes to put together a good refund clause in all of your contracts. Not only can it help you comply with local laws and regulations, but it is also an important part of good customer service. It’s working well for me, and I’m sure it will do the same for your computer business.
Do you currently have a refund policy? Why or why not? Is the policy displayed prominently on your website and marketing documents? I would love to hear your feedback in the comments!