What is Risk Reversal Marketing

Risk reversal is a very effective marketing strategy where you remove the risk associated with a purchase from the customer and move it to yourself as the seller.  This may be a real risk, or a perceived risk.  But by removing the risk associated with the purchase from the customer they’re more likely to make the purchase.  In fact, they’re often willing to pay a higher price for your product or service when using this strategy.

Risk reversal is probably one of the most powerful tools in your marketing toolbox. It can greatly increase sales, yet very little.  

What is a Risk Reversal Strategy?

Risk reversal strategy is where you remove the risk from the customer and move it to your business.

Why is it Called Risk Reversal?

It’s called risk reversal because you’re reversing the risk to the customer and redirecting it to the seller.

Why You Should Include Risk Reversal in Your Marketing

Risk reversal helps your customer overcome any barriers to making a purchase.  It allows you to get a higher premium than your competitors.  Easier to close sales.  Get better reviews – higher customer satisfaction levels.

Risk Reversal Differentiates You from Competitors

Most businesses are boring businesses.  With boring businesses risk reversal is a way to differentiate yourself from your competitors.  Even though you may have a boring business, the customer sees risk doing business with you.  Especially if they have a lot of choices – try Googling, “plumbers near me” and see just how many there are in your area.

Risk Reversal Adds Value to Your Offer

By removing a risk from your customer your product or service has a higher value.  Let’s look at a plumber example.  Suppose a plumber offers a 2-year “double your money back” guarantee if any of their work fails.  Fixing your leaky toilet is now guaranteed not to leak for two year – and if it does you’ll get double your money back.  Would you pay more for this service knowing that they’re so confident in their work that they’ll pay you back twice what you paid if it fails?  How much more?  Perhaps an extra 10%?  Or maybe more.  I certainly wouldn’t be going with the lowest priced plumber if I had the choice to pay a little more for peace of mind.

Types of Risk Reversals

There are many types of risk reversals.  In fact, the number of types of risk reversal is only limited by your imagination.  To get you started thinking about what risk reversal type you can use in your marketing we’ve compiled a list of some of the most common ones.

  • Money Back Guarantee
  • Better Than Money Back Guarantee
  • Free Trial
  • Free Sample
  • Free Return Shipping

Why You Should Include Risk Reversal in Your Marketing

Risk reversal helps your customer overcome any barriers to making a purchase.  It allows you to get a higher premium than your competitors.  Easier to close sales.

Example of Product Risk Reversal

I sell an outdoor product which has some components made of glass.  Customers may be concerned that the glass portion may break leaving them with a product which is no longer usable.  I created a “protection plan” which protects them against broken glass forever.  If for any reason the glass breaks (no matter the fault), I will send them a free replacement.  The only thing I ask of them is to cover the shipping cost.  With this risk reversal strategy, I’m not only bringing attention to a potential problem, I’m also differentiating myself from competitors.  The actual cost of this is very low for me as there likely won’t be many replacement pieces I need to send – and the cost of shipping will be covered by the customer.  This allows me to not only differentiate myself, but the customer is willing to pay a higher price knowing they’re protected against breakage for life.

Example of Service Risk Reversal

With a service-based business risk reversal is quite easy.  For example, a lawn care business in my area offers to revisit and fix things, free of charge if you aren’t fully satisfied with the service you received. 

From their website:

“However, we realize that the lawn pros are human and will sometimes make mistakes. That’s why we are proud to offer our total satisfaction guarantee. What this means, is that if you aren’t fully satisfied with the service you received, just let us know within 24 hours and your lawn pro be happy to come back and fix things, free of charge.  This guarantee doesn’t end with your first lawn care service either. We’ll follow up with you after each and every service to ensure that your lawn is getting the best care possible!”

Risk Reversal in Copywriting

Copywriting is key to an effective risk reversal strategy.  Your copy must clearly define what the risk is and how the customer is protected from that risk.  By creative copywriting your customer will be able to see themselves in that risk situation and then the risk being taken away from them and moved to the seller/business.

What is Your Risk Reversal Policy?

Now that you know a lot more about risk reversal, it’s time to develop a risk reversal policy for your business.  No matter what business you’re in, there is a risk reversal strategy you can implement to differentiate yourself from competitors.  Whether you’re selling something as boring as paper, or a new high tech gadget, or a service you can apply risk reversal marketing in your business.