Membership refunds: what's the best policy?

It can be frustrating to get refund requests after all of the hard work you’ve done to get your membership site up and running (not to mention creating the content itself), but unfortunately, they are a reality!

Let’s be honest: it hurts when your members cancel. When it comes to the value you provide, you’re confident in your product, and the last thing you want is to lose a customer while having to return the money you’ve earned. So, how should you handle refunds? What’s the fairest policy for you and your customers?

In this post, we’ve decided to shed a little light on the different aspects of membership refunds to help you settle on a policy that works for you!

Understanding refunds

There are various reasons why customers might request a refund; maybe the customer intended to cancel, but forgot, or they got the payment date wrong and let the membership lapse. Or, they were confused or misinformed about the membership benefits and decided it’s not for them.

Some customers just don’t get enough use out of a membership due to their busy lives, or they decide to reduce their outgoing expenses for financial reasons. Whatever the case, it can be easy to take it personally, but the best thing you can do is learn from the experience! More on that later.

Prevention is the best medicine

Before we look at refund policy in detail, let’s talk about some ways you can prevent refunds in the first place. While they may come with the territory of running a membership site, that doesn’t mean you shouldn’t do what you can to minimize them!

Here are just a few ideas that can help to prevent refund requests:

  • Offer a free trial membership or free membership tier. This allows people to try out the goods before they make a financial commitment.
  • Keep members in the loop. Send regular newsletters about site updates, new content, and anything else designed to keep your members engaged and active.
  • Send renewal reminders. Cut back on refunds that come from lapsed renewals by reminding your members about any automatic payments well in advance of the actual payment date.
  • Be accurate and transparent in your marketing, sales pages, and web copy. Bringing in more sales by omitting information or over-selling inflated promises could just lead to more refunds in the end.

Terms and conditions

If you want to effectively manage customer expectations, clarity is essential. You want to be sure that you’ve communicated effectively, leaving no stone unturned – and no customer confused! Plus, being forthcoming in your policies not only distinguishes your responsibilities as the site owner (for your sake in particular); it also helps to give members the trust they need to commit to your site for the long-term.

Thorough terms and conditions can make all the difference to prospective members, setting them up to make an informed purchase decision. Clear, concise, and deliberate language that’s friendly and casual enough to be easily understood can be disarming and much more inviting to customers than outdated, legalistic jargon (which can actually put customers on edge and make them skeptical of your whole operation).

The money-back guarantee

A money-back guarantee is one effective way to create customer confidence, as it removes the financial risk involved in the customer’s purchase. Plus, it can show the customers that you’re confident in the quality of your product – and you’re confident they will be satisfied!

The best practice when it comes to money-back guarantees is to decide on a specific time period during which a customer may request and receive their money back with no questions asked. A common example would be a money-back guarantee that applies anytime within 30 days of signup.

Choose your battles

When deciding on the specific terms of your refund policy, it can be helpful to think about things like the way you want to conduct your business, how you want to interact with your members, the effects of online reviews, and your long-term revenue and brand image goals.

Do you want to fight against refund requests on a regular basis? Is it worth your time and energy? You might decide that you’d simply rather focus on positive things like growing your business and keeping your loyal members happy.

Sometimes, negative interactions – no matter how justified – can actually cause more problems in the long run. Maybe you are in the right to defend your decision to refuse a refund, however it’s worth considering the damage a highly dissatisfied customer can do via word-of-mouth and online reviews.

People are increasingly tech-savvy, and they’re often willing to go to great lengths to protect their money, even if they know they are in the wrong. If a customer decides to open up a PayPal or Stripe dispute, it can actually end up costing you more than issuing a refund, and payment processors generally tend to side with the customer.

Not only that; this kind of conflict can damage your account standing if there are too many disputes filed, which can be a major headache that has the potential to affect your whole business. However, none of this is to say that there aren’t circumstances under which denying a refund request is totally justified!

You might choose to refuse refunds for one or more of the following scenarios:

  • The customer signed up for your site, downloaded all of your content in one day, then immediately asked for a refund
  • The customer signed up for your site, only to remain completely inactive for several months, then decided they want a refund for the entire length of the unused membership
  • The customer signed up to your site and shared their login details, with login records showing active sessions in different countries

And here are some scenarios when you may want to consider issuing a refund:

  • The customer requested a refund within the money-back guarantee or refund policy timeframe
  • The customer asked for help, but their issue wasn’t resolved prior to requesting the refund
  • The customer signed up, didn’t use or download anything for one month, then requested a refund
  • The customer is not happy with the membership for whatever reason

In cases where you do issue a refund, consider allowing customers to use their membership until the end of their renewal date, regardless of when they cancel. Pro-rating membership dues is always a possibility, too.

Sometimes it helps to learn by emulating other membership sites. You can check out our refund policy at Restrict Content Pro for some inspiration!

Strive for simplicity

If you’re going to offer refunds in the first place, it’s generally most effective to keep it simple. Even though refunds can be a bummer, you don’t want the process to be so convoluted that it’s impossible for people to complete. Simple and straightforward is key!

Make it easy for customers to find the refund page or request form; ideally it’s not so front-and-center that it encourages refunds, but try not to hide it away and make it too hard to find, either!

Learn from each occurrence

Is there an obvious reason why you’re getting refund requests? Is there an abnormal amount of requests? A few each month is normal, but if you’re getting questionable numbers of them, it might be time to take a look at how your site and content is doing. What could be improved? Is there a common traffic source that’s producing members who cancel? Is there something that’s not working?

Refund requests can teach you a lot. Sure, there will be scenarios where the customer is hasty, or worse – irresponsible. But, you’ll likely find that most requests are are coming from brand new members who aren’t quite satisfied with the membership for some reason.

Play the long game

At times, a short-term loss is worth the long-term gain of building a brand that is known for exceptional customer service and positive experiences. Sometimes people who cancel memberships even return later on for one reason or another, or they appreciate the helpful experience enough to retain a positive view of your company (potentially even supporting future products or projects).

It can be tempting to hang on every refund request and negative message; in fact, it can feel downright offensive at times! But the truth is that memberships thrive on long-term member retention, and as long as your numbers aren’t dropping sharply or consistently, a few refunds here and there won’t stop you from achieving membership site success.

How do you handle refunds for your own membership site? We’d love to hear your insights, so leave us a comment below!

Mandy Jones

About the author: Mandy is a content writer at Sandhills Development, singer/songwriter/musician, and founder of Looplicious. Originally from Minneapolis, Minnesota, she's a frequent traveler and animal lover with a passion for creativity and maker culture.