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Should You Offer Refunds to Customers?

When it comes to customer satisfaction, freelancers are often consumed with ensuring that clients are happy with their services. However, these relationships do not always end as envisioned. Whether a client makes a choice to terminate service because of a geographic move or because of a bad customer experience, there is only one question that determines the appropriateness of refunds:

If you give back the money, can the customer give back the service?

As freelancers, we are not protected by the same policies and regulations that can cover larger organizations. As a result, it may be easier to “cave” when a customer requests (or demands) their money back. However, if the service was not a concrete item, refunds are difficult to negotiate.

Most freelancers offer their services in the form of time, energy, creativity, and/or expertise. We can’t get these values back. So unless you consign vintage clothing or distribute phone cases or some other physical good, you should consider having an “alternative refund policy” for those situations when customers negotiate the value of your time and talents.

Buyer Beware

As freelancers, the first “attitude adjustment” needed is to remember the phrase “Buyer Beware”. If you think about your own purchasing and consuming experiences, there are very few experiences that are refundable. Customer experiences aren’t always positive, but most do not allow for refunds. From bad meals at restaurants to a missing button on a dry-cleaned shirt, most businesses do not operate on the assumption that their income is dependent on your satisfaction.

However, in order to provide a fair “out” for clients, it’s important to have some kind of guarantee that will provide for extenuating circumstances while protecting your income. Here are a few ideas:

Allowing for Buyer’s Remorse

If your services are mostly non-physical and involve a time element, you can invoke a 3-day or 7-day window post-purchase to allow customers to change their minds. Putting it in the Terms and Conditions, however, doesn’t draw undue attention to the clause.

This allows customers, if they panic after their purchase, to cancel the purchase if they experience buyer’s remorse. It’s important for the window of time to be short, however, to allow for true buyer’s remorse but not encourage flip-flopping. If a client has worked with you for more than a month, however, you have rendered services that you cannot take back.

Buy Out

If there is a time element to your services, you can allow a client to “buy out” committed but unused time. For example, if you are hosting a client’s website for a year and they pay by the month, but they decide to switch services after six months, you can allow the client to “buy out” the remaining six months at a discounted version of your fee.

This allows you to recoup at least a portion of your anticipated income, and also encourages the client to think twice before switching. Again, this is an important component to have in your “Terms and Conditions” clauses.

Offer a Do-Over

This is common in service industries. Instead of offering a refund, many businesses offer to repeat the service for free or at a discount. This allows you to spend time instead of money to create more customer satisfaction.

If you are a busy freelancer, your time may be as valuable or more valuable than money. If you are just starting out, on the other hand, your money may be worth far more than your time. It’s up to you to decide if offering a complimentary service is appropriate.

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Finance Author
William Lipovsky owns the personal finance website First Quarter Finance. He began investing when he was 10 years old. His financial works have been published on Business Insider, Entrepreneur, Forbes, U.S. News & World Report, Yahoo Finance, and many others.

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