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5 Reasons You Should Offer Guarantees

Most in the creative professions wouldn’t think of offering guarantees, and they often demonstrate an involuntary physical response to any suggestion that they should.

When I propose this from a stage I can hear the room quit breathing as the gut muscles tighten and the sphincters contract.

Guarantees–are you crazy!?!

How can you guarantee the impact of a logo, an ad campaign or a re-branding? How do you even measure the impact?

The Satisfaction Guarantee

It’s not results that I’m suggesting you should guarantee (although there’s a time and place for that, too.) No, I’m talking about guaranteeing the client’s own decision to hire you–a satisfaction guarantee.

The satisfaction guarantee I’m proposing is simply the guarantee that after hiring you and working with you for a little while the client has the freedom to decide whether he made the right decision and would like to continue, or decide that hiring you was a mistake from which he’d like to extricate himself and get his money back.

Such guarantees are not used often enough, I believe. Which is too bad because this type of guarantee is valuable to both parties, it’s powerful in its ability to close a nervous or tentative client and it has numerous positive effects on the firm and its performance.

Here are five reasons why you should consider this type of satisfaction guarantee, followed by some guidance on how to use it.

1. A Guarantee Forces Selectivity

If you offered clients a satisfaction guarantee it would almost certainly force you to be more selective about who you worked with. Without one, it’s the client taking all the risk in the relationship. With one, you’re sharing the risk more equally.

You’ll force yourself to consider the danger of offering a broad, fairly open-ended guarantee to someone you don’t trust, which will cause you to be more discerning in the sales cycle. Should you really be doing business with these people? This more selective approach will make you seem more professional and therefore attractive to prospective new clients.

2. A Guarantee Steers You Away from Selling Time

Implied in any transaction of time and materials is the idea that the client is taking all the risk in the relationship. As soon as you add a guarantee you take some of the risk away from the client, and any strict accounting of hours starts to make less sense.

With a satisfaction guarantee that’s executable at the end of the first, strategic phase of the engagement, you’re going to work hard to demonstrate value at that point in the engagement to ensure the client continues into the implementation phases. You won’t care too much about counting hours if you’re worried you haven’t delivered value. In this way your guarantee forces more accountability upon you and makes it increasingly difficult for you to sell hours. Instead, you’ll be more focused on value creation or, at the very least, deliverables, and you’ll tie your pricing to these things rather than time.

3. A Guarantee Allows You To Charge More

Hell, you might have to charge more, and that’s a good thing. A price arrived at by calculating labour costs (rates x hours) is almost certainly not going to be high enough once you add a guarantee, for the reasons discussed in point 2 above. You’re going to have to charge a premium.

In the article The Justice of Price Premiums I explain that a premium is an amount that a client willingly pays above an ordinary or benchmark price in exchange for taking less risk and that’s exactly what’s going on here. Less risk for the client means more risk for you and therefore more money. It’s a simple law of business as widely understood as Moore’s Law or laws of physics like Newton’s Laws of Motion: risk is the source of profit. Many good clients will gladly pay more for the lower risk afforded by a guarantee.

4. A Guarantee Aids in Closing

Closing, as I’ve discussed many times before, is all about calming a nervous late-stage prospect down and reassuring him that everything is going to be okay.

Early stage prospects over-weight the benefits of hiring a new firm, and late-stage prospects (those closer to buying) under-weight the benefits and over-weight the costs and consequences of failure.

Your firm may be at the table because you represent an exciting alternative approach but what got you there isn’t what gets you over the finish line. The job of the closer is to prove, as best as possible, that everything is going to be okay. What better way to prove something than to guarantee it.

Your willingness to propose a guarantee speaks volumes about your own confidence in your ability to deliver, and it offers the desired safety valve that is behind almost every request for unpaid speculative work.

Of the many absurdities of agency new business development, perhaps nothing is more ludicrous than a firm that will pitch for free but bristles and balks at the idea of offering a guarantee. A guarantee is almost always a more powerful form of reassurance than ideas conceived in the absence of any properly informed strategy or a collaborative client.

5. A Guarantee is a Powerful Alternative to Cutting Price

A request for a price reduction, like a request for a speculative pitch, is often the client’s attempt to mitigate the risk represented in hiring you. Everyone wants a lower price, but sometimes the basis for the negotiation is fear of failure and an attempt to lower the costs of said failure. If that’s the case then a satisfaction guarantee is an even better alternative than a price break.

In response to the request for a lower price you can simply say, “We can’t do much for you on the price, but what I can do is offer you a satisfaction guarantee. If, at the end of the strategic phase of the engagement, you’re not completely satisfied with the work, the value or the relationship, we’ll fix it or end the relationship and refund your money.”

Two Conditions

Guarantees are better when used selectively rather than broadcasted early and often. They’re also most powerful when they have fewer restrictions attached, so don’t load yours down with them.

The guarantee is being offered as a mechanism to begin working together so the client can gain the confidence they need to feel like the decision was the right one. It’s not tied to results, just the client’s own satisfaction.

There are only two conditions you should attach to your guarantee. The first is the client must pay in advance. The client is truly engaged only once they have parted with their money, so don’t begin a guaranteed engagement until you have payment on the first phase or at the very least a sizeable deposit. Anything less than 50% of the price of the first phase would make me nervous.

The second condition is the client must agree to work with your firm in the way you’ve described to them that you need to work. The goal of this condition is to ensure the client is engaged throughout and allowing you to lead. This includes access to key decision makers and demonstrating a willingness to follow your prescribed approach. If you have any concerns about either, be very clear up front that these are conditions of the guarantee.

That’s it. No other conditions required. The addition of others will almost certainly harm, not help you. A certain amount of trust in the client is required, but, again, that will force you to be more discerning about who you do business with.

You Screwed Up–Now What?

Does a guarantee guarantee that you’ll nail it, the client will proceed and everyone will live happily ever after? No, but the worst case scenario of the client exercising his right to walk away happens rarely. When it does happen it’s because the firm didn’t deliver–possibly because they took on an engagement they shouldn’t have. (If that’s the case then the firm has larger problems of expertise and ethics that won’t be solved by a guarantee.)

Sometimes the out-clause in the guarantee gets invoked because a less than forthright client wasn’t all that committed to the project or the firm, but these ones can be sniffed out with just a little bit of diligence in the sales cycle. (If it happens to you more than once then you might have an impaired ability to size up other human beings and should perhaps pursue a more solitary career like shepherding or lighthouse management.)

If you get to the point where the client might exercise the guarantee and you haven’t delivered fair value then the right thing to do is to admit you haven’t yet achieved what you had hoped to, take a step back and come back to the table with revised work. Most good clients will give honest firms one mulligan and allow for this approach as long as both parties are invested. In the end, everybody wins.

Try it. Do this properly and you will build a more discerning, accountable and lucrative firm.

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