Does your guarantee provide value and eliminate risk for the prospect, or does it simply give their money back?
While giving their money back is often seen as an ideal guarantee, the fact is that while it’s the easiest effective guarantee you can make, it’s also the least common denominator.
Does your business reputation depend on least common denominator service? I suspect it doesn’t.
Least common denominator?
A least common denominator is like a best practice.
The term “best practice” implies something only the best companies employ, but the reality is that there’s so much focus on best practices that they’re often the average.
“Average” because these best practices are what most businesses do. The truly best practices of the best companies are often unseen to most other, or they’re simply not recognized as something that provides a substantial competitive edge.
These things don’t have to be expensive or mind-blowing. They simply require seeing your business relationship with the customer from their perspective. One example is being mindful of opportunity cost.
What about opportunity cost?
While a money-back guarantee does eliminate the client’s obvious loss-of-investment risk, it doesn’t take into account their opportunity cost – the cost to them of your inability to deliver.
Protecting the client from lost opportunity isn’t part of most guarantees, but it should be part of yours.
Let’s look at airline flight guarantees to understand why.
If you book a seat on a plane for travel to a critical face-to-face meeting and the plane is late for reasons other than severe weather, the airline may reroute you, book you on a competitor’s flight or worst case, get you a hotel room for the night so they can try to get you to your destination the next day.
What they won’t do is compensate you for missing the meeting, even your late or non-arrival is entirely their fault. How would they calculate what to pay you, assuming they could afford to?
If you miss a meeting due to air travel issues and this ultimately costs you $20 million, do you expect the airline to cough that up because you bought a $400 plane ticket? Only the narcissistic would have such expectations.
All the airlines can really offer is a full refund in the form of a future flight, a flight on their competitor, or to ask you to be patient while they work to eventually get you to your intended destination.
Even if the airlines sold “guaranteed travel” tickets at a much higher price, the logistics of delivering a guaranteed service would likely make it unprofitable for them.
Given the possible reasons that a flight can be late, it’s understandable, so why does the lack of an opportunity cost guarantee come off as weak in your business?
Create a truly meaningful guarantee
Most of you don’t have the logistical issues that airlines have, so you can offer a guarantee that deals with lost opportunity cost without a huge expense or effort. All it takes is some thought, action and follow up.
That’s why not protecting a client’s opportunity is weak.
If you own a local hotel, there will be times where you can’t fulfill a reservation. Plumbing leaks. Power fails. Stuff happens.
If you have an arrangement with nearby competitors, a bed and breakfast and a few airbnb hosts, you can avoid leaving a guest out in the cold. While it might not seem like a big deal to you, these things have a way of happening when the prospective guest is an influencer on Trip Advisor, or worse, a travel writer with two million Facebook likes and a cable TV show.
The same thought can go into guaranteeing carpet cleaning, car rentals or whatever you do. Take away the investment risk like everyone else, then wrap the opportunity loss in bubble wrap.
Go to the bullpen
When a pitcher throws so many pitches that they “lose their stuff”, managers call the bullpen for a pitcher with a fresh arm.
That’s what customers want. They don’t want excuses. They just want whatever you promised. Your job is to figure out how to deliver that even on your worst day, or when your pitcher has lost their stuff – whatever that means in your business.
To a client, an appointment or a reservation is a promise – and often that client has made promises based on the one you made them.
Depending on where you live, you may have paid to drive on a toll road.
Toll roads have been modernized in recent years to cause fewer traffic jams while encouraging drivers to sign up for the wireless automated payment systems they support. Instead of a toll gate that requires drivers to stop and pay with cash, multiple lanes have sensors that read an in-car device’s wireless signal that identifies your car.
That device is tied to a credit card or bank account so that the tolls are collected without stopping or worrying about having the right change. Because you didn’t have to stop to pay, the likelihood of traffic jams at toll booths is sharply reduced and makes your trip faster.
Increasing costs associated with maintaining roads have prompted toll road managers to look for ways to increase revenue on their roads. Toll roads have always charged more for vehicles with more axles. The idea there was that more axles meant more vehicle weight, which wears down the road more quickly. This formula for variable tolls has been accepted by those driving commercial trucks for some time.
So how do toll road managers find a way to get more revenue from the same traffic, but without raising tolls for everyone?
One of the ideas they’ve come up with focuses on eliminating traffic neutrality.
What is Traffic Neutrality?
Traffic neutrality is the idea that all vehicles of the same type pay the same toll. Whether you drive by yourself in a rusted out 1962 Ford Fairlane or you drive a $92,000 2014 Mercedes S550 full of Fortune 50 CEOs, the toll is the same.
Tolls for commercial vehicles work similarly, so if you drive a beat up three axle commercial dump truck carrying grass clippings, you pay the same as the driver of a brand new three axle dump truck carrying nuclear waste.
In other words, the toll is the same and the cost applied without conditions across traffic when you look at vehicles of the same type.
That’s traffic neutrality.
A new idea for raising toll road revenue
A change you might be seeing soon removes this neutrality and allows the in-car device to add additional charges to the toll based on where you are going and how important the trip is to you and your family or business.
For example, if you’re racing your wife to the hospital so she can deliver a baby, or someone is driving you to the doctor due to the allergic reaction to a bee sting, this would be sensed as an important trip and thus, the toll would be higher.
Another revenue idea is full speed lanes. Motorists on important trips pay more to drive in lanes free of interference from speed-control vehicles. Speed control vehicles drive slowly to moderate speeds in lanes not designed for “full speed limit service”.
Speed’s easy to manage since a road’s speed limit is regulated by law. However, the speed collectively driven above a toll road’s minimum speed limit is not. In order to manage these slower speeds, toll road managers pay frequent drivers a stipend to drive 10 or 15 mph below the speed limit.
Drivers are paid based on a device that monitors the car’s speed while on the toll road. If you meet your commitment, you get full pay.
These cars pull the average speed down for lanes that have not qualified for “full speed limit road access”, while not violating the law since those speed controlling cars drive at speeds above the road’s minimum speed.
Traffic volume plays into this as well. As the number of cars paying to drive at full speed increases, the demand for fast lanes increases.
When a new lane is needed, a non-full speed lane is converted to full speed and all remaining cars are funneled into the remaining non-full speed lanes. This increases traffic on the slower lanes and motivates more people to buy into full speed limit service on the toll road.
What’s this really about?
For now, this annoying toll road story is made up. However, it describes exactly how the Federal Communications Commission is conspiring with large internet services and content providers to control internet traffic and destroy “net neutrality”, the real world internet version of traffic neutrality.
If this sounds like an idea that will hurt your business, call your Senators and Representatives and ask them to preserve net neutrality.