What is a good refund policy for a SaaS product?



I’ve evolved my thinking here.

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.

But … now, I say generally speaking — Just Do It.

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.

View original question on quora

Published on December 25, 2017

One Comment

  1. Spot on. This is pretty much the approach that we’ve taken from the outset at Promomash… if someone wants out, it doesn’t make sense to take their money for value that never materialized (which could have been for any of a myriad of reasons). As often as not, the time just isn’t right for the client. And, as often as not, they are happy to come back later when the time IS right for them.

    The one adjustment I might make is that if we’re going to do a pro-rated refund, we might count the months since subscription at full monthly (undiscounted) price, and refund what’s left over. That seems fair enough…

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