MBA2630 Q&A Wednesday: Is My Refund Policy Too Generous?

Is your refund policy helping or hurting your business? Striking the right balance is crucial—too generous, and you risk losses; too strict, and you may scare off buyers. Rita sent in this question for Omar, and if it's on your mind too, this episode is for you. Press play! Omar breaks down what industry data says about refund rates, how a well-crafted policy can actually boost conversions, and ways to protect your business while keeping customers happy. Plus, you’ll get actionable tips for handling refunds with clarity and fairness, reducing abuse, and building long-term trust. A well-crafted refund policy does more than just set rules—it builds trust, strengthens customer relationships, and can even boost sales. When done right, it reassures buyers while protecting your business, creating a fair and balanced experience for everyone. Hit play at the top of the page and learn how to make refunds work for your business, ensuring clarity, confidence, and long-term success! To submit your questions, visit 100mba.net/q. Watch the episodes on YouTube: https://lm.fm/GgRPPHiSUBSCRIBEYouTube | Apple Podcast | Spotify | Podcast Feed

• 0:00Speaker 00

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• 0:45Speaker 00

  They handle the things you can't afford to get wrong, so you don't have to worry. So you can focus on the parts of running a business that you enjoy, knowing everything else is running smoothly. You don't have to worry when it just works. Rita asks, is a refund policy too generous? This is a great question because your refund policy isn't just a footnote on your website. It's a trust builder. It can also be a conversion killer. So how generous is too generous? In Rita's case, she has a 30-day, no-questions-asked money-back guarantee for her online program. So let's break down and find the sweet spot that protects your business and makes your customers feel safe. And hey, if you have a question you want me to tackle in a future Q&A Wednesday,

• 1:28Speaker 00

  head on over to 100mba.net/que and ask away. And apologies for my voice. It's a little bit hoarse today. I don't know why, but the show must go on, so let's get into it.

• 1:45Speaker 00

  Welcome back to the $100 MBA Show. I'm your host, Omar Zenhome, where I deliver practical business lessons three times a week, Monday, Wednesday, and Friday, to help you start, grow, and scale your business.

• 1:58Speaker 00

  So let's break it down. I found that refund policies actually matter more than you think. A generous refund policy can actually increase conversions. Why? Because people are afraid of risk. They're afraid of wasting their money. They're afraid of making a mistake. A clear, confident refund policy says, "We stand by what we sell." If it's not for you, that's okay. You can have your money back. It lowers resistance. It creates trust and creates confidence that this person actually is standing behind their products. But here's the catch. If your refund policy is too open-ended, too vague, or too long, two things can happen. Now, I'm speaking in generalities here, but this is what I found.

• 2:40Speaker 00

  That number one, you attract refund abusers, people that treat your product like a rental. And number two, you train your audience not to take action. They feel like there's no consequence to requesting a refund. They don't take your offer seriously. And most of all, they don't actually take action on your product or service. They don't actually use and consume your product and service and get a win and feel satisfied. Here's what the data says. Industry statistics show that refund rates for online courses can really vary widely. Standard refund rates, based on the data, was pretty shocking. The standard refund rate is typically between 8% and 12%. I have never had refund rates that high. That's like 10% of people asking for a refund.

• 3:24Speaker 00

  That sounds really high in my experience, but maybe it's just the way I've packaged my products. But that's what the data says. That's what research has shown us with online courses. Number two, higher refund rates, in some cases, happen, especially when a course doesn't meet expectations. So when you have people that are spending a lot of time and energy and effort on marketing, more time and effort than the actual product itself, then often they overpromise and underdeliver, and that increases the refund rate dramatically. And it could be as high as 30%. In my opinion, in my very humble opinion, your refund rate should not be higher than 5%. If it's higher than 5%, that means there's something wrong with your product. Your product is not meeting the needs of your audience.

• 4:09Speaker 00

  Okay, either you gotta change your audience or change your product, because that's pretty high. That means for every 100 customers, five people are refunding. You don't want that. You want it as low as possible. Today's episode is sponsored by Whatnot. You've probably heard about live selling and it's taking off on Whatnot. Sellers on Whatnot don't need a storefront or paid social media ads to reach customers. This is what I love about it because with live video, you interact and engage with your customers. You just need your phone and buyers can ask questions. They can make purchases in real time. On Whatnot, you could see people selling from living rooms and warehouses, selling sneakers, electronics, vintage, even a guy on a boat selling lobsters he just caught. Thousands of items are sold every minute because customers get to know sellers and see the products live.

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• 6:34Speaker 00

  Now, the data I just shared with you, these figures, they suggest that a generous refund policy can build trust. It's essential to ensure that your course content meets or exceeds your customers' expectation to minimize these refund requests. So, I always try to advise my students, when they're building products or services, you need to really be unreasonable. I know this sounds crazy, but be unreasonable with how you meet expectations or exceed expectations. Like, they're just like, "Wow, this person's going way above and beyond. This is a lot more than I was expecting," and therefore, this helps you reduce your refund requests dramatically. Here's my philosophy on refunds: be generous, but with some boundaries, just so that there are some rules.

• 7:18Speaker 00

  Here's a great rule of thumb: give them enough time to evaluate your product, but not enough to forget that they bought it, okay? So, give them enough time for them to actually get started, consume, get a win. That usually means a 14 to 30-day refund policy. 30 days max, I would say. Obviously, it depends on your product or service, but that was enough time for my products to be consumed by my customers. So, for example, in my software company, Webinar Ninja, we had a 14-day trial, where they didn't pay anything to use the product, run a first webinar. That's enough time for them to build something of value, use it, and feel like, "Okay, this is the right product for me." They don't need more time than that to evaluate if this webinar software is good enough for

• 8:03Speaker 00

  them. With my online course, $100 MBA, we have a 30-day no-questions-asked money-back guarantee. We're a little bit gentler. You don't need 30 days to evaluate if this course is for you, but we're a little bit more generous, because we know people get busy, and sometimes they buy, and then they don't have time to really get into the course until maybe a weekend or two later, and we just kind of err on the side of being generous. You also want to have a clearly-defined refund request process. So, if they have to ask to cancel or ask to get a refund, how do they do that? Well, make it very clear. Do they email support? What's that email address? Make sure that's clear on your website. Make sure that's clear maybe inside of their membership area. Make it super simple for them to understand. Hey, this is a low risk situation. And even I do this in the sales webinar.

• 8:48Speaker 00

  Like when I talk about why they should buy. I said, hey, if this is not for you, you can just go into your account. This is what you do. Hit cancel and we'll get an email from support. And you can get a refund within 30 days. If that cancellation happens within 30 days. Also add a tell us why question to collect feedback. I always encourage everybody to have a cancellation process in place in their business with their products or services. So when they're asking to cancel, when they're asking for refund, there should be some sort of survey they need to take to give you feedback. We have this automated inside of our, our membership area. So when they cancel their membership, they're asked a few questions. And these questions allow us to improve, allow us to create a better product or service.

• 9:33Speaker 00

  And it's pretty painless if it's just three or four or five questions. And people understand that that's typical and that's okay. As long as it's not like a 20 question survey, I think that it's pretty painless. This keeps your policy honest and fair for everyone. And trust me, serious customers respect clear boundaries. So let me wrap this up for you. 30 days for an online course is a pretty decent and generous, in my opinion, refund policy. It allows people enough time to get into the program, to learn, to watch a few videos, to consume, to implement what they learned and to get a win. If it's not for them, 30 days is plenty of time for them to realize that.

• 10:13Speaker 00

  It's also generous enough for people to feel like, okay, I have 30 days to make a decision when I buy. It's not like I have five days or seven days. It's kind of tight and they may not have time for that. But I also want to say you may want to experiment. We experimented with refund policies constantly in our businesses in the last 10 years. For your business, you might find that a 45 day refund policy might convert better, might get more customers than a 30 day money back guarantee. Also track how many refunds you get from that cohort when you made that change. So maybe you want to balance conversions with refunds. So like, hey, if 45 days got me more conversions, but got me a whole lot more refunds, then maybe I shouldn't do that.

• 10:55Speaker 00

  But experimentation is really what you need to do when it comes to any kind of decision like this. And this is kind of low risk. It's not really going to make or break your business, but it's worth experimenting because it can mean more money for your bottom line. Here's the truth. Before I go, I want to leave you with this. Most people won't ask for refund just because they can. Most people are decent, okay? But when you know there is a refund policy in place, there's more of a likelihood that you're going to say yes in the first place. The customer will say yes in the first place if they feel like, hey, there is a risk reversal. There's a way for me to reverse this decision if it's not for me. So to be fair, to be clear, make sure your refund policy isn't just a policy.

• 11:39Speaker 00

  It's a reflection of your confidence and how you treat your customers. Thanks for tuning in to the $100 MBA Show. If you want more practical ways to grow your business without guesswork, then you should subscribe to my Three Things newsletter. Every week I send you three things. One, something to think about, something to grow your mindset. Number two, something to do so you're stacking wins week after week. And number three, something to learn so every single week you're scaling up. It's absolutely free and all you got to do is go to 100mba.net and sign up for any of our guides and you get added to our newsletter automatically. It's my way to coach you from afar and help you along your journey. Until next time, keep on going.

• 12:21Speaker 00

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