Ever hear of the “Trial Mark”? In 1869, for his home brewed medicinal products J.R. Watkins created bottles that included an embossed “Trial Mark.”
Mr. Watkins sold his products door-to-door and offered the first Money Back Guarantee to consumers, provided their use of the product did not extend beyond the “Trial Mark.” – Ingenious!
One hundred and fifty years later, money back guarantees are a trillion (with a T) dollar business in the U.S. With that comes about a 10 billion (with a B) dollar loss for businesses.
The Pros (from the consumer side):
- “Yay! I can try this product risk-free!”
- “This company must really trust its products.”
- “This company’s better than that company because they don’t offer a money back guarantee.”
The Cons (from the business side):
- “I can’t read the receipt and the form isn’t signed, what should I do?’
- “Can we donate the unused portion to the Goodwill?”
- “If I have to amend the balance sheets again, I’m gonna blow.”
Let’s take a look at what guarantees you can get if you end up in court.
What is the meaning of “Satisfaction Guaranteed”? Courts have actually grappled over the interpretation of this oft-used phrase. The consensus is that it is to be interpreted based upon the understanding of a “reasonable person” – not an unconditional customer-determined satisfaction.
Is the customer’s recovery limited to the price of the product? Not necessarily. Courts have held that a money back guarantee does not insulate the seller from fraud or defective practices.
Is an exclusive remedy provision enforceable? Generally, yes; absent fraud or deception.
Must consumers comply with the terms’ prerequisites to obtain a refund? Courts will uphold clear, unambiguous submission requirements that are substantially complied with for a refund.
What material terms should be included in a MBG? At a minimum, the material terms of a money back guarantee should include:
- Specific identification of the product (specially-marked is good).
- Specific instructions for the refund, including all materials that must be sent in, typically, original MBG form, original store receipt and original UPC, and if practical, the used portion of the product.
- The dates (i) for purchase, (ii) for redemption and (iii) for expected refund.
- Geography (U.S. only, etc.)
- Exclusions such as geographic, family/household members, groups, fraud, illegible, incomplete.
- Number of purchases/redemptions allowed per person.
- Contact number/email of sponsor representative.
This post should in no way be interpreted as a guarantee that money back guarantees are the perfect remedy to keep you in business for 150 years.