Big Idea 2014: Should You Take the Ultimate Risk?
by Tom G., Co-Founder, THE MOTLEY FOOL
This post is part of a series in which LinkedIn Influencers pick one big idea that will shape 2014.See all the ideas here.
My co-author, Morgan Housel, recently had lunch at a small Indian restaurant in Philadelphia. Before he ordered, the owner stopped by to offer this simple promise:
“If the food is not good, you don’t pay.
“If the food is just good, you don’t pay.
“Only if it’s great do you pay.”
It was great. Morgan paid and tipped, amply. Now he plans to eat there often.
Dream with me for a few paragraphs about how changed our world would be were your satisfaction promised, loyalty assured, and money back guaranteed. . . always. Every smartphone, every cup of coffee, every yoga class, every advertising spend, every feature film, every medical procedure, every automobile, every everything.
Now imagine, too, what it might be like to work for such a company.
If your products are lousy, your accounting team will hike reserve levels toward 100% of sales. No one will have a job for long. But if you are true believers doing stellar work, the whole team will walk the offices chin-up with pride. Honored that the business stands behind what you bring to life.
True freedom like this in a commercial world sounds like a crackpot idea. How plausible is it to scale the offer of a single Indian restaurant across hundreds of billions of global transactions every year?
It’s absurdly impractical.
Except that it’s exactly the policy abided by Nordstrom, Zappos, LL Bean, and Costco – companies that book more than $110 billion in sales per year. They make a no-hassle, money-back guarantee core to their identity. None of us should be surprised that these are 1) brands beloved by their customers and 2) companies whose employees shine with enthusiasm.
Now, it takes true grit to venture that first step. To debut an open-arms return policy. To start with just a single product or service. To take the ultimate risk.
But amazing things will happen:
1. You’ll get to eat the truth!
Few better information sources exist than a customer saying, “I tried your product. I don’t like it. Here’s why.”
The smartest companies – positioned to thrive through the Transparency Revolution – treat this information like a five-course meal. They acknowledge the error, fix the defects, and start spotting opportunities faster than anything an inanimate survey can provide. And their buyers love them for it.
Illinois-based food equipment manufacturer, Middleby, made a convection oven with a glass door. Several of its commercial customers shattered the door, accidentally hitting it with steel food carts in busy kitchens. That can’t be Middleby’s fault, right?
The company not only accepted the damaged goods for a full refund, it took the opportunity to build an oven with a smash-proof glass door. “The hard work and deeper learning from our quibble-free warranties make for a true competitive advantage,” Middleby’s CEO Selim Bassoul told us in an interview earlier this year.
2. Your customers will open their wallets… wider!
We are creatures of habit, disinclined to try new things as years pass. When’s the last time you rolled the dice on a travel package to a foreign city without much research? Or grabbed a new vegan brand of pizza, having never eaten vegan? Picked up six concert tickets for a band you haven’t heard of? Or pointed, clicked, and bought a car online?
The electric-car company, Tesla, developed its own twist on a money-back offer. Theyguarantee the resale value of their cars. CEO Elon Musk is delivering an endlessly wide margin of safety for new buyers. You can bet there are a whole lot of Tesla employees that take tremendous pride in that. And Tesla is now outdoing high-end car companies that have much broader distribution.
The offer of a full refund invites customers to tinker with new products they wouldn’t otherwise consider. Over time, you’ll attract a multiple of new buyers. It’s up to you to satisfy them.
3. You will create an ecosystem of trust!
A recent study by Havas Media has found that “the average consumer would not care if 70% of brands ceased to exist.” Take a second to see if that rings true.
Allow me to speak for you: “Yep.”
It’s going to be real easy in the 21 century to land in that dismal majority. Irrelevant, unloved, untrusted. Guaranteeing satisfaction doesn’t just attract more willing buyers; it doesn’t just give you consequential feedback on what you’re doing wrong; it doesn’t just help you rapidly improve you’re offerings. It engenders trust and builds loyalty.
I want a financial firm that will return my fees if I’m not satisfied. A doctor, too. Same from a marketing agency. A designer. A mechanic. And a hiking equipment company. I will buy more daringly with guarantees for gadget gizmos and flatscreens and new books and hair gel (ok, that doesn’t apply here).
British Prime Minister Harold MacMillan once said that somebody who trusts no one is apt to be somebody no one trusts. If you can’t trust your customers with a no-hassle return policy, why should they trust you?
The full refund, unclaimed
I won’t say that refund guarantees work in every situation. You’ll have to determine where they fit. And, sure, a tiny fraction of customers (1-2%) will abuse your trust, so you’ll want a policy for repeat offenders. That’s small potatoes.
It’s just obvious that the world wants to invest their time, capital, and emotions into brands that do more than glorify themselves in big-budget TV campaigns with Hollywood star promoters. They want a promise. A promise that you’ll keep. They want to have fun buying and using your service. They are rooting for you to be inspiring and thankworthy. They come to your table hoping to be loyal forever, prepared to leave your refund offers forever unclaimed.
Maybe this theme that I believe will take hold in 2014 starts over Indian food in Philly. Who’s in?
Photos: Minerva Studio / shutterstock