Heights Platform How to Create the Best Refund Policy for Your Online Course

How to Create the Best Refund Policy for Your Online Course

13 minute read

Setting up a proper refund policy for your online course is an essential step that can impact your sales and revenue. It is also a step that is often overlooked by creators. This article will cover how you can create the best refund policy for your online course business, and why offering a more lenient refund policy is generally a better strategy than offering a free trial of your course or digital product to your customers.

91% of consumers interviewed in a Harris Poll agree that a refund policy is an important factor influencing their purchasing decision, reports the New York Times.

If such a policy is useful in brick-and-mortar stores, it becomes integral for online businesses. Even more when it comes to online education where the end product being sold is not a tangible good. The product students are purchasing from you is the result you are promising them they can achieve, and this isn’t something they can feel or touch like they would be able to when ordering a physical product online.

In the world of online courses, a well-thought-out refund policy is more than a mere formality; it is an important marketing strategy. It can make a direct impact in your bottom-line profit.

A classic example of a refund policy for online businesses is the “money-back guarantee,” which sends a message that the seller is fully confident about his/her product. If the buyer is not satisfied for some reason, they’ll receive a full refund.

This strategy works well since it reassures even the most cautious buyers - who otherwise would not have the confidence to make a purchase - by giving them a feeling of security.

In the e-commerce world, there are many different types of refund policies. However, when it comes to online education, things get trickier. Since there is no physical product to return, and the buyer can’t offer any concrete proof to justify the reimbursement, a refund policy for online courses needs to consider a couple critical aspects in order to work.

Let’s go into detail about the two key pieces in a successful refund policy below:

1. Be Lenient

Nowadays, a refund policy is seen more as a marketing strategy than as a legal obligation. It’s the seal of trust that helps eliminate potential customers’ initial apprehension.

Opting for an extremely strict refund policy will only be counterproductive, and can negatively impact your business and the perception of your customers.

A good refund policy needs to reassure buyers and give them the confidence to purchase your online course or digital product with trust.

If you have no idea where to start, our advice is to steer towards a more lenient policy. Consider offering a 100% Money-Back-Guarantee or a similar refund policy.

Generally speaking, when a customer asks for a refund - and it’s clearly not a scam - it’s better just to give them their money back and avoid a bad review or the hassle of discussing with the customer and dealing with chargeback disputes. Chances are that there will be a similar amount of customers that ask you for a refund or even try issuing a chargeback on you, even if you say clearly there are no refunds!

It’s understandable to be apprehensive about offering such a lenient policy, especially as a new online course creator. Read on and we’ll explain how you can protect yourself while still offering a lenient refund policy for your customers.

Let’s see a few examples of successful online course refund policies that chose to be lenient in their requirements.

online course refund policy example
The refund policy of Amazing.com.

As an example, the image above shows the refund policy of the online course of Amazing.com, that teaches people how to create a business selling products on Amazon.

They offer a high priced, premium product, and their refund policy remains extremely generous, intending to eliminate any risk that comes with the investment students make when purchasing their course.

They have a 30-day no-risk money-back guarantee policy, and they don’t demand any particular reason to ask for a full refund.

But they still didn’t think this lenient policy was enough to convince any potential customer, so they added a further promise to their students:

online course success guarantee example
Offering a success guarantee to students of your online course.

They are offering to pay back any investment - up to $5,000 - made by the students during the course!

This policy and guarantee is a relatively extreme example, but Amazing has dialed in their numbers and proven their course to be successful, so it is a policy they can offer with confidence.

Since their course teaches people how to make money by selling on Amazon, it just makes sense to refund the initial investment to unsuccessful students.

By promising all this, they appear incredibly confident about their program, and consequently, this improves their image as an authoritative and scam-free course.

That said, the obvious question that you are probably asking yourself at this point is: wouldn’t everyone try to take advantage of them with such a lenient policy?

Let’s deconstruct Amazing’s refund policy to understand how it works out to be a win-win, providing benefits to both their business and their customers.

Their course appears to last more than 60 days, so even if you wait until the very end of the 30 days to request a refund, the most you can see is half of their content. This protects their business from the type of customer who thinks they can come in, see everything, and then plans to refund from the start, and likely won’t ever complete a course they purchase.

At the same time, a 30-day money-back guarantee helps potential customers feel more confident in their decision to invest in the course.

Now, let’s look at their “Success Agreement”. Here they offer a massive guarantee that they will reimburse you for up to $5000 of inventory that you purchase, if you are unable to sell it in 6 months. While this is an incredible guarantee to offer, the way it is structured actually ensures that Amazing cannot lose money!

Their “Success Agreement” requires that their customers put their knowledge into action and launch a product within 4 months, and then follow all the marketing steps within 5 months. Then if at 6 months or before you feel like there is no way it will work out for you, Amazing will reimburse the customer for up to $5000. So what is Amazing doing here? There are some requirements, but it sounds like this guarantee provides tons of value to customers, and we’d agree it does!

There are a couple of important things to note about the terms of this agreement:

  1. This cannot be combined with asking for a refund for their course. They don’t have to explicitly state that, because their terms already explain how a product must be launched within 4 months and all promotions steps must be followed in 5 months. Since this requires a significant amount of effort on the customer’s part, it would take longer than the 30-day money-back guarantee, so by this point the customer has already committed to stay past the 30 day refund period, and has decided to go through the entire course.
  2. It isn’t completely clear from these screenshots alone if reimbursement for inventory means they would be purchasing the inventory from the customer, or simply sending them funds to cover the costs. Amazing’s Amazon selling course (ASM) has a price tag of $5000. This means in the absolute worst-case scenario for Amazing, they would make $0 from a customer (the equivalent of refunding them), but Amazing will never lose money, even with their $5000 reimbursement offer! Remember that is up to $5000 of unsold inventory in 6 months. If the customer has invested less than $5000, the reimbursement amount is lower, and if Amazing is actually purchasing that inventory themselves, then they can likely resell it at cost easily, in which case they would still be making thousands from that customer even after reimbursement.

These simply laid out policies are great for the consumer, but also ensure the business cannot lose money. Even though the terms are lenient and fair, they still protect Amazing’s business from disingenuous customers who might be trying to get their course content for free.

Even though you cannot be sure this won’t happen, let’s see how course creators can avoid unfaithful refund requests:

  1. Choose your target market carefully: depending on your offering, try to identify your ideal customer’s profile, and the profile of those customers more prone to be dissatisfied by your course (and therefore abuse of your refund policy). Then go ahead and promote your program only to your ideal students.
  2. Don’t overpromise: if you’re promising unrealistic results just to get a few initial sales, it’s more likely that your students will demand a refund once they’ve completed your course and not achieved what they were hoping for.
  3. Set up a few conditions for a refund: As you can see in the example of Amazing.com, there are a few conditions for which students can be eligible for a refund. We will talk in more detail about conditions that might work for your course business later in this article.

Even if you are doing everything right, there still may be one or two people who intend to abuse your generous refund policy. However, if you do this right, the reward will be much greater than the risk.

Let’s see another example of a lenient but successful refund policy; this time is from one of our course creators here at Heights Platform.

Nicolai Grut is an artist who sells digital products like downloadable digital brush packs to his students. This is his refund policy for the digital product:

Heights Platform creator Nicolai Gruts refund policy
Heights Platform creator Nicolai Grut's refund policy.

He explained to us the reasoning behind his choice, and it just makes sense:

The less restrictions you put on the refund terms the higher your conversion rate increase will be.

I simply say - 100% money-back guarantee. If you don't like [the product] just send me an email within 30 days, and I'll refund your purchase -.

I started out with no guarantee for my first two years, then a pretty strict one, but the looser I make it and the longer the refund period, the higher my conversion rate goes.

I get about 1 refund request for every 205 purchases. That's about 0.5%, and I’d be fine with up to 7%.”

― Nicolai Grut

As Nicolai’s example shows us, the refund policy actually impacts the number of sales, and the more lenient it is, the higher the conversion.

This also goes to show that a generous refund policy doesn’t necessarily mean that your customers will take advantage of it or that you’ll get more refund requests. In this case, only 0.5% of his sales ended up reimbursed.

That said, chances are that you’ll still get refund requests, and the more popular your course gets, the more requests you’ll receive. However, with a flexible refund policy, your increase in conversion should be much higher than your refunds.

For example, let’s say that you are selling a course for $200. Without a refund policy, you get 50 sales and 0 refund requests. You then decide to add a flexible refund policy to reassure your customers, and you get 60 sales, from which 3 of them ask for a refund (a 5% refund rate, which is likely much higher than you’d get in reality).

Without a refund policy: $200 x 50 = $10,000 revenue

With a refund policy: $200 x 60 = $12,000 initial revenue (refund requests: 3 x 200 = 600)

$12,000 - 600 = $11,400 revenue

calculation of increased revenue as a result of a better online course refund policy
How a great refund policy for your online course can increase your revenue and sales.

Even though 3 people asked for a refund, the net revenue was still higher in the case of a lenient refund policy, since the sales number increased.

2. Set Simple Conditions for Your Refund Policy

A well-thought-out refund policy should protect you and your students. Your policy should include some simple and fair limitations or conditions for your students to respect in order to be eligible for reimbursement.

First, for any business, it is good practice to allow refunds within a limited time window.

Additionally, many course creators will require that their students complete some lessons or show the results of a project before asking for a refund.

Let’s see these conditions in detail.

Time Limits

Most refund policies include a time condition, where the customer is allowed to apply for a refund only within a certain amount of days.

Depending on your course, it’s up to you to decide the time window’s length. However, for online courses, many refund policies allow refunds between 7 and 30 days from purchase. Up to 60 days works for some creators. It is rare to see something like 90 days or longer because this causes a potential accounting hassle for your business, and in most cases doesn’t provide any real extra benefit to customers, since 30 days is enough time to really evaluate and make up your mind on something.

Our advice is to set a fair amount of time for your students to understand if your course is a good fit for them.

30 days is usually a good length of time to serve both students’ and creator’s interests.

Completion Requirements

It is also common for course creators to add a few completion requirements to their refund policies. These types of requirements can vary depending on the structure and length of your course.

For instance, you could say that in order to apply for a refund, students must complete at least 50% or the whole course.

This way, you are pushing your students to get a result from your lessons and this further incentivizes them to get the value they have paid for.

Another possible requirement to include in your policy is asking your students to complete any project or assignment you might have on your course. By putting their knowledge into practice your students will witness the results and real-life applications of your lessons, and they’ll be less likely to feel dissatisfied with your course or ask for a refund.

In this way, you’ll increase your chances of keeping away scammer refund requests. Students understand that this is a fair offer because you shouldn’t have to refund someone only because they are too lazy to go through the content they paid for (you want to push students to get the result they desire).

That said, you should not overdo it. A requirement like this is already much more strict than a simple “no questions asked” policy. Making your students do the impossible just to get a refund will be counterproductive and will only ruin the trust and reputation built around your course, not to mention you will get negative reviews.

Think about it, if you are in a restaurant and the food you order is not good, you don’t have to eat the whole dish in front of the staff and show them you’re feeling sick in order to get a refund.

So try to find the right balance: your goal should be to build a refund policy that is fair for you and for your students.

Why should you avoid free trials without a payment method?

Giving free value to your potential customers will surely help them feel more confident and enthusiastic about purchasing your course. It is common for creators to consider offering a free trial period for their paid course as a way of accomplishing this. At a glance, offering a free trial period for a paid course doesn’t seem that different from offering the opportunity for a 100% refund on a purchased course within the same period, but in practice, there is a major difference in how this can impact your sales numbers.

However, it is important to understand that subtle differences in how you approach the offering of this free content can have major implications.

Offering a free trial for your paid program, without collecting credit card details of your students can actually damage the image of your course and reduce desirability.

Giving a free “mini-course” that might lead up to your paid course is great, but a free trial of the paid course itself is generally a strategy that should be avoided.

Our advice is to avoid letting students into your paid program without collecting their payment information. Let’s see why:

  • You are reducing their desire: as per the concept of “you get what you pay for”, consumers tend to think that the higher the price, the better and more exclusive that product is. You’ve likely built up a significant desire within your potential student through your marketing once they get to the point that they are ready to enroll. If your course is not “hard” to get and your customers can access it too easily, they will not be as committed and excited about it as if they had to leave their payment details.
  • It’s bad for your revenue: consequently to the loss of desire for your course, your sales will be impacted negatively as well. If your students are not excited about your program, they won’t purchase it. When your potential student is allowed in your paid course for free, all of the desire you have built up fades away because they have now gotten access to what you had to offer, and if you asked them to buy now they’d be much less likely to feel motivated to hand over their payment details. If you instead had the customer pay up front, and then offered a 100% refund opportunity, they have now already committed to paying for your online course, and they want to get their money’s worth, so they are more likely to put in the work.

Again, wanting to offer free content to your students is great! Offering a free mini-course that leads up to and invites students to purchase your paid course can be an excellent strategy.

You want to show your potential customers that you can actually help them, solve their problems and you are not trying to scam them.

What should be avoided is specifically giving free trials to your actual paid flagship course product without first collecting payment information. We believe free content should be clearly separated from your paid content. Giving access to paid content for free, even if temporary, can send a signal that you don’t value your content at the price you are trying to sell it at.

Here are solutions you can use instead:

  1. Offer a free trial with credit card information: while we prefer and believe that a lenient refund policy for a course that is paid works better than a trial period where payment information is collected upfront - if you must offer a trial period, then collecting payment information upfront ensures that you get the student to commit and provide their payment details when their excitement is at the highest.
  2. Set up a powerful refund policy: by this point in the article you should be an expert in the field. Offering a strong refund policy can provide your customers with the confidence they need to purchase your course, and forces them to commit to paying in order to get access to the content they desire. This ensures that you do capture the sale.
  3. Provide a free preview of your content: strategies like adding a preview video to your course’s landing page or giving out a free “mini-course” or hosting a webinar (etc…) can provide value to your audience and increase their eagerness to purchase your paid course for the complete experience.

To Sum Up

As a course creator, having a solid refund policy is no longer optional. A well-thought-out refund policy is not only a link at the bottom of your page.

It’s a marketing strategy, and it can help you increase sales.

The key to build a successful refund policy is to be lenient, in order to reassure even the most cautious buyers. Set conditions where necessary to protect your business from disingenuous buyers by including time limits and completion requirements that result in a fair policy for you and your students.

To provide even more confidence to your audience, experiment with offering some kind of free product to provide value to your potential customers and build trust.

Finally, in order to close the most sales, ensure you are asking your potential student to commit by providing their payment details before granting them access to your paid/premium content.

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