What is a good refund policy for a SaaS product?

SaaS startups, especially those that sign customers to annual customers, will have customers that want to cancel those un-cancelable contracts and get a refund.

Almost every vendors says “No”. “You signed the contract”. “You got a big discount for pre-paying.” Etc. etc. And Sales especially hates this. They don’t want their commission clawed back.

I didn’t give refunds, perhaps in part because we weren’t asked for that many.  But even so, whenever I saw one asked for, I also saw a ton of internal energy expended around them.

Now, I say generally speaking — Just Do It.  At least, for whatever portion of the term they didn’t actually use your product for real, in production.

Just give any annual customer a refund for the unused portion of the contract, and so on, or at least a partial one. Or give them a credit for coming back later. (And yes, I know there are accounting issues here. Take a reserve. Such is life).

Why? Because that way, you may get them back, and they will remain a brand advocate.

But if you burn them … those few nickels you’ll keep aren’t worth it. Most SaaS vendors with happy customers don’t get that many material refund requests. You have bigger issues to deal with.

In SaaS, you constantly have to re-earn your customers’ business anyway. No matter what the contract says.

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Published on December 25, 2017

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