Refunds for digital products [2021 edition]

a guide for both vendors and consumers
dealing with refunds for digital products

Dealing with refunds for digital products in 2021

Whether you are selling WordPress Themes, Plugins or services, dealing with refunds for digital products is a very delicate matter. When someone requests a refund there is a possibility for either party to feel unsatisfied with the result.

  1. The vendor may feel the refund request is unjustified.
  2. The client could be unhappy if the vendor refuses to provide the refund.

We have changed our refund policy several times and now we are convinced there is a right way to deal with refunds,and with this post we are sharing it with you.

Do online vendors have the right to deny a refund?

Not only do they have the right, (except in the UK under the Consumer Rights Act) but many others do not even provide refunds for digital products.

This is because while digital products can be downloaded they cannot be returned like a physical product, and the same goes for any digital services offered.

Try asking GoDaddy to refund you for a domain you forgot to cancel and you’ll see from their reply what I mean. Last time I tried to contact them concerning this issue they didn’t even reply.

The iTunes App store sales policy clearly says that you cannot cancel a purchase or receive a refund for a purchase (but if you have a valid reason, they have been known to make exceptions).

As mentioned above, only in the UK are digital and physical goods treated equally.

However, for a client to get a refund they should be able to prove that the digital product isn’t:

  • Of satisfactory quality.
  • Fit for a particular purpose.
  • As described by the seller.

That’s not that easy to prove.

In almost every country (with some exceptions) refunds for digital products are not mandatory.

In most cases merchants are only required to clearly post their refund policy.

PayPal has both a buyer and a seller protection programs. Digital products are not included in the seller protection, so refunds for digital products could be granted in dispute cases fairly often.

Before buying, always ask yourself: is there a refund policy?

The onus is on you, as a consumer, to make responsible decisions about the purchases you make online.

Typically there are three types of refund policy.

  1. The Marketing Suicide: We stand by our product and we provide no refund whatsoever.
  2. Would be fair, but just isn’t: 30 days money back if you asked for support and we failed to provide a solution.
  3. The smart solution : 30 days money back guarantee no questions asked.

We tried them all for a long period of time so we can tell you all about them.

The Marketing Suicide – No Refunds

At first we were so proud and protective of our work that we took it badly on a personal level every time someone even thought to request a refund.

In hindsight, it was not a productive or worthwhile manner in which to conduct ourselves.

It created a bitter, stunted feeling between both parties and left us unhappy.

In addition to increasing our workload when we could have been devoting our attention to improving our products.

It’s just wasn’t worth it, especially when we considered that we were a growing company with increasing visibility.

Our 1st refund policy was the following:

We offer digital media (software) that can be downloaded instantly after a purchase has been made. There is no “trial” or “grace period” after purchasing any product which means all sales are final. Once you have purchased the software, there is no way to “return” it.

It is a member’s responsibility to cancel any payment authorized through PayPal. If you decide to stop the membership and discontinue using our Products, remember to login to your PayPal and cancel the Authorization.

There will be no refund for members that forget to cancel their subscription.

Reading it now it gave me chills 🙁, it was a disgraceful way to act, and we learned it the hard way.

Would be fair, but its not: 30 days money back if you asked for support and we failed to provide a solution.

When we realized that our 1st refund policy was creating more problems that it was solving, we decided it was time for a change. We looked at the rising stars at the time, that being WooCommerce and decided to follow their footsteps.

Our 2nd refund policy stated:

If you are still not satisfied with our products and services after giving us at least one chance to make GeoDirectory work for you (by interacting with us in the support forum):

We will refund your money, as we feel we have failed out responsibilities as support staff.

Ask for a refund within 30 days from your initial purchase here. You will get it, no questions asked.

It is a client’s responsibility to stop payments authorized through PayPal. If you decide you would like to discontinue using our products, please remember to login to your PayPal account and cancel the Authorization.

This was more effective than our first policy, but still created friction with clients. Some clients didn’t attempt to seek support and expressed through their inaction their desire to leave our partnership.

Our previous efforts brought us to our third and final policy.

30 days money back guarantee, no questions asked

Our third and final, refund policy states:

If you are not satisfied with our products and services and are still within 30 days of the original purchase date, your request for a refund will be honored, no questions asked. You can request it here. (Lifetime deals are not covered by this refund policy, please read below)

We cannot grant refunds on renewal payments.

We will send you 2 reminders about your renewing subscrition. The first notification is sent two weeks prior to your renewal date and the second email is sent one week prior to your renewal date.

You may use these opportunities to cancel your subscription before the renewal payment is automatically processed.

For our protection, refunds are not permitted on Lifetime Deals.

The payment gateways refund fees for Lifetime Deals are almost as high as the purchase of one of our add-ons.

This is the reason why refunds for the LTD do not make business sense for us.

If you wish to test the product before commiting to the lifetime deal, please consider purchasing a 4, 6, or 12 months membership, which are covered by the refund policy.

If you decide to upgrade to the Lifetime deal before the end of the membership, we will provide a coupon code for the full amount paid for the initial purchase.

Disputes

Should you open a dispute, instead of asking for a refund, we will keep 50% of the disputed amount while we gather evidence for our submission of the refund.

It is a client’s responsibility to cancel payments authorized through PayPal or Stripe.

If you decide to cancel your membership and discontinue using our products, please remember to login to your PayPal and cancel the authorization. (see instruction here for Paypal). For payments made through Stripe, you can cancel the subscription after logging in, through the “Your Account” page.

Why is it the best.

First of all, you may be surprised to find out how many clients request a refund without providing a valid reason. They are an insignificant percentage.

As a business, we are not losing money. It’s lost revenue, but we didn’t lose the respect of a potential future client who may not ever approach us in the future as the result of a bad customer support issue.

We stand by our products and can personally attest to their quality. While our business is in selling products, we would rather maintain a satisfied customer base than naked profiteering.

While we can definitely afford lose some business, we understand that many of our clients are not so easily able to lose $200 on a business investment, such as a digital product.

Why don’t refund renewals.

That should be self exaplantory. We send you 2 reminders. One 2 weeks prior and one 1 week before the renewal takes place.

The product has been used for one year and if you are asking for a refund, it is definitely not because the product was not satisfactory.

The only reason can be, that the customer disregarded both renewal notifications or stragiht up forgot to cancel. IN that case, the onus shoulsdn’t be on us.

Especially considering the refunds have costs for the vendor.

Why do we state we keep 50% if a dispute is open instead of a direct refund request?

If you open a dispute with your Bank, PayPal or Stripe, because you didn’t read our policy, you’ll make us do extra work to gather evidence that PayPal or other Payment Gateways require to close disputes.

Not only this, but in most cases gateways charge a dispute fee, not only would we be refunding the money but we would be out of pocket also, so this statement is meant as a deterrent so we are not out of pocket. (our first step of a dispute is to email the customer to find out whats happening, if they close the dispute before we have to gather and submit evidence then we do give a full refund for first time purchases)

If you fail to read our policy and then go on to open a dispute with your bank, Paypal or Stripe then you are causing us to take time away from improving our products and business.

When you could have asked for a refund directly?

Why do customers open disputes, when you are that willing to refund?

90% of the time for renewals (recurring payments) which are not covered by our refund policy. I guess because they don’t read what they are buying and ignore renewal notifications.

We  still to this day get people sending us angry emails that often sound like this:

You charged me without my authorization! I opened a dispute and you better give me my money back!

Obviously, we didn’t charge them without their authorization. We couldn’t even if we wanted to.

What happened is that they didn’t read what they were paying for, and we’re not talking about fine prints.

We are extremely clear about subscription & recurring payments. It’s written everywhere:

(there are single non subscription options with our memberships)

In the pricing page

In the Frequently Asked Questions, below the pricing table

In the Check out page

If you use Paypal, it will remind you before final check out

PayPal repeat it once more in their email receipt

Finally we send you 2 email reminders 14 and 7 days before the renewal.

Conclusions for Buyers

Just make sure you read any and all Terms and Conditions, and the refund policy before buying. Most vendors are honest and are not trying to fool you. By reading the Terms and Conditions, you can make sure this never happens to you.

Conclusions for Vendors

While dealing with refunds is inevitable, dealing with them graciously is more important.

Turning refunds from bad to positive experiences will help to maintain a positive relationship with our client base, and in turn help our reputation. We will attract back customers in the future that we may have otherwise lost forever.

We may even get referrals from them that we wouldn’t have done if we hadn’t done something to change our policies.

We’ll have less work and be able to keep our stress levels under control, leading to better products in the future and a more positive environment in which to conduct our business.

While we may be losing revenue in the short run, we’ll feel better about our products and clients in the long run.

Do you agree with us? How do you deal with refunds? Please let us know in the comment down below.

Published by Paolo

Paolo Tajani is the co-founder and growth hacker of AyeCode LTD. With his business partner Stiofan, they are the makers of the GeoDirectory, UsersWP and Invoicing plugins for WordPress. Paolo developed his first WordPress website in 2008. In 2011 he met Stiofan O'Connor and together they started building and marketing successful themes and plugins for WordPress. Today their products are used by +100.000 active websites.

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