I am new to the world of software and I am noticing that you do things differently here.
Some of it is great – I don’t mind that I have had to put my entire wardrobe of business suits into storage and go out and buy a load of jeans and trainers, I’m not missing the endless, pointless meetings I used to sit in, and I’m getting used to the idea that no-one is going to ball me out if I turn up at 10 in the morning, so long as I put in a full day’s work.
But some things are proving more difficult to understand. So for the next couple of weeks I thought I would share some of my “new girl” thoughts and perhaps pick up some insider knowledge from you along the way.
So first up – guarantees.
At Pentalogic we have always had a money back guarantee written into the small print of our license agreements and I was keen to make a bigger deal about this on one of the main pages of our website.
So, I went off to spy on the competition, to see how they did things and hopefully get some good ideas.
Only to find that most of our direct competitors offer no guarantees at all.
The first company I looked in to are quite explicit about this on their website
“we do not provide refunds. The key reason is that we make available a fully-functional trial version of the product for download . . . “
Well, most motor dealers will let me test drive a car, but just because a car goes like a dream on the test drive doesn’t give me any guarantee that the wheels aren’t going to fall off three weeks after I buy it.
And it’s the same with software, you may download and install your free trial version, and have a good play with it. But it’s very unlikely that you are going to test every eventuality in a trial. In our market especially (we provide web parts for SharePoint), you are probably going to trial the software in a contained environment, within maybe one department – who knows what you will encounter when you buy the full version and roll it out to the whole business.
From another company I got:
“our company’s refund policy is: A request for a refund will only be granted if it is received BEFORE the license code has been sent.”
Hmmmm, great, I can get a refund as long as I decide I want it before I even buy the product.
And from another:
At the moment due to licensing issues we are not able to get license back is case of money refunding.
And then finally the company which does offer:
A full 5 day money back guarantee
(what happens to the software on day 6 I wonder?)
I have heard the argument that this is a business to business sale, not a consumer sale. A business buying software should carry out thorough testing and due diligence before making the purchase, so there should be no need for refunds. Well, maybe this is the case for enterprise level $50k plus software, but in our market where price tags run at under $10k the purchase decision may be a little more spontaneous.
This argument in any case ignores the fact that all purchase decisions, whether business or consumer, are ultimately made by a “human”, who will bring emotional responses to the table.
As a customer – (and a “human”), if a company tells me they don’t offer refunds it provokes two emotional responses in me:
- they are not confident that I will be satisfied with their product/service
- they are not interested in building a long term customer relationship with me, just interested in making a quick buck.
Is this really the message these companies want to be giving out?
Clearly its not all software companies who adopt this approach. For example, Fog Creek, offer this:
“If you’re not satisfied, for any reason, within 90 days you get a full refund, period, no questions asked. We don’t want your money if you’re not amazingly happy.”
Now that’s my kind of a guarantee! Confident, trusting and no messing around.
But those taking the Fog Creek approach seem to be heavily outnumbered by those with the “we’ve got your money and we’re keeping it, come hell or high water!” attitude.
This all leaves me with two questions.
Firstly – why do customers accept this?
Secondly – why would companies choose to do it? A software license holder doesn’t actually “consume” anything, it’s not as though there is a finite amount of your software program and each license you issue means there is a little bit less left of it for you to sell to other people.
There is little or no cost to a software company in providing a refund – so why would you choose not to?
Answers on a postcard please?
Tags: SharePoint
Clare,
I think it’s just one way that enterprise software companies protect their intellectual property. They figure if the buyer knows he can’t get his money back, he’ll only buy it if he has a legitimate business need for the software, not to check out the code, then return it. Limiting sales to only the serious buyers who really need the software also limits the firm’s exposure to IP theft somewhat.
Mary
In our case every installation is typically customomized and involves hundreds of man hours to load their data, configiure the system and tweak the software to operate the way the customer wants, and we provide the source code. Once delivered they own it.
Although we have bought back the licences — less the services on some occassions.
Our market is usually in the 15-100,000 range.
We are not shrink wrap software.
So we do have significant expenses on every sale.
Yes you can take a car out for test drive, but you can’t use it for week, month, or a year and then decide to return it.. Oh yeah, you can now since the government guaratees it. If the federal government underwrites me I will be gald to support commodity merchadsing policies.
Joe, with hundreds of hours of configuration I can see that what you are doing falls into a completely different category and I can see that a “money back guarantee” would not be a good fit.
From my own experience I believe that projects on this scale are often paid for by the client in stages as the work is carried out, which is in itself a pretty good guarantee I guess.
Clare,
Your question: “why do customers accept this” is spot on. Having worked for many software companies I would not.
Joe Fisher’s point is also on target for enterprise software, the customizations and interactions with the many disparate components is vast and no software company can test all permutations. A software package may work fine but the customer did not have the right version of Database so the software does not work and therefore wants to return it.
Perhaps the most important factor is the revenue recognition. If a guarantee is offered for 90 days the software company cannot recognize the revenue. For a public company you can understand the pressures at quarter end when most deals are completed.
The practice is not likely to change until the big software companies (business and enterprise I am speaking of) change their approach.
Count yourself lucky that your competition is so clueless. ;0)