the sky floor

Don’t Be a Recurring Revenue Pirate

August 5, 2022
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As popular as pirates are in pop culture, taking your customer’s money under anything but voluntary circumstances will sink your ship.

Yesterday a plugin I purchased for a client renewed its yearly subscription. I had forgotten entirely about the plugin and that it was set to renew automatically. The problem is, we aren’t using this tool with our client’s website anymore!

So I did what any person would do – contacted support and asked for a refund. After all, it had just happened. The revenue wouldn’t have cleared into their bank yet, but instead of offering to help, they said no refunds

I suppose this is entirely within their rights but is it a good business practice? I would argue no.

Business runs at its best when the customer voluntarily spends their money in exchange for a good or service. The second a customer suggests this didn’t happen, you must try to rectify the situation. 

Here is the thing: businesses aren’t about collecting money at any costunder any circumstance. That is what thieves and pirates do. 

I am sure this is a small business; they see that revenue as money-in-hand they will lose, but they may be sacrificing even more than $49; I will never buy from them again. Nor will I recommend the plugin to anyone else, so what is the actual cost of that $49? Likely a lot more than what they lose by issuing a refund. 

What’s the point? (Besides my being grumpy)

If you run a business with a similar model, consider a limited, reasonable refund period for accidental renewals – between seven and fourteen days. 

As with any marketing and business, you aren’t merely looking at today’s revenue – the future hinges on a thousand smaller choices that add up to how the marketplace views you. And how you are perceived is a more powerful currency than money. 

In other words, it may not be a big deal that I will not buy from this plugin company today, but we create hundreds of sites every few years and interact with dozens of other agencies, businesses, and web designers. 

The True Cost

I know of a competitor plugin that works as well or better, so even if I tell ten clients/other developers to use the competition, now they didn’t lose $49 but $490 (or more, since the base plugin costs $159, so potentially $1,600). Now multiply this policy against ten others like me who feel the same way, and you see the snowball effect of future lost revenue. The cost of small decisions can add up to big problems later on. 

Takeaways:

  • Consider a reasonable but generous refund policy if you run a recurring revenue business. If you really want to make it work for you, offer the refund freely in a trade for a positive review. 
  • You aren’t making choices just for today. Every business decision adds to future action or inaction, resulting in severe revenue loss or gain. 

Update

The business decided to refund me after I pushed back a little bit… my advice is to not let it take that for you to refund your customers in a similar situation!

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