Chargeback Prevention Resource
Too much and you've blown it, too little and you're leaving money on the table.
We’re kicking off our very first article by talking about the one thing everyone loves to hate. You know, like that strange distant relative who appears from time to time at family gatherings with their stories that you just can’t seem to escape listening to. You guessed it, Chargebacks!
We’re not going to go deep into what a chargeback is or what kickstarts the process. Instead, we’re going to focus on the methods and tools you can use to mitigate them. In other words, keep them under control. Now “keep them under control” might mean a lot of different things to a lot of different people. For the sake of this article, keep them under control means to maintain them at levels that we feel don’t severely harm the reputation of a business and it’s bottom line. Ultimately it depends on your risk appetite (and that of your processing bank/platform).
There is no quick fix to this, especially for scaling offers. What we’ve seen work time and time again is creating and maintaining a chargeback strategy. Which is basically:
Chargeback Mitigation = Systems (alerts, fraud screening, etc) + Strategy (messaging, pricing, Post-sale support, etc)
It's important to note that not all of these suggestions may/can apply to you. This is a general (high-level) set of suggestions and guidelines that we feel can benefit most merchants. We strongly suggest reviewing each of these in order to determine which ones are best suited for your business model, product offer and current level of scale. Or, just ask us for help :)
1. Descriptor name: Is your descriptor descriptive enough? (get it?). When customers see the name appear on their statement, can they immediately make the connection to their recent purchase with you? This can cause a lot of headaches, unnecessary customer calls and an avoidable increase in chargebacks. Most of the time its an easy fix. Check in with your processor/platform to ensure you are within the allowed character limit when creating or modifying your descriptor. These can include:
Contains between 5 and 22 characters, inclusive.
Does not contain any of the special characters < > \ ' " *.
Reflects your doing business as (DBA) name.
Contains more than a single common term or common website URL. A website URL only is acceptable if it provides a clear and accurate description of a transaction on a customer’s statement.
2. Customer support will often make or break your post-conversion funnel. It's as important, if not more so, than your sales funnel. It's the first place customers will go to when they have a question or concern about a recent purchase or a soon-to-be one! Your customer support should be agile, easy to navigate, and always responsive. The below applies to both desktop and mobile users.
Member's Area: Customers should be able to (easily) login, recover their user/pass 24/7, and find where to get help fast.
All phone numbers (local + int'l) should be:
Online 24/7 (or at least with an automated response)
Simple to use IVR with option to speak with someone (check out Twilio for great resources and call center ins and outs)
Multilingual option if your selling in high-volume to non English speakers
Email addresses used to reach support should be:
Easily visible on the receipt page and thank you email
Working and not falling into spam (multiple 3rd party tools can check this)
Regularly monitored by at least 2 people (assuming there is also an auto-responder)
Have some form of auto-response text that informs the user when they should expect a response and highlight top 3 reasons of contacting support with a link the FAQ page.
Chat (Bot or live) : Let's face it. No one likes talking on the phone anymore. Your chat solution should be simple enough to answer most questions by referring to articles in your help section AND should also come with an option to chat with a live representative. It's important to make the latter option easy to find as this will avoid a phone call which comes with higher costs.
3. Billing Terms. Whether you are offering an x-day free trial, Straight Sale, or a continuity sale, the billing amount and rebilling schedule needs to be:
Visible, Transparent and often repeated.
Most customers can't wait to get their hands on the product you are trying to sell them and will speed through your sales funnel. (Ever measured the average time spent on each page of your funnel) ?That's great, right?
If the billing terms are below the fold or in 2px font, then your conversions are likely costing you more then what they're bringing in. Finding the right balance is key!
Transparent pricing and billing terms
Often repeated throughout the sales funnel
Pricing terms included in purchase email
(Optional) Email reminder of an upcoming charge or renewal of one.
4. Refund and Return Policies can be a hedge against chargebacks. If the copy is clear and easy to find it can also act as a support cost saver in reducing easily answerable customer calls, emails and chats. These policies should be transparent, easy to find on your website (often on multiple pages) and included in your emails with hyperlinks.
Descriptive enough and easy to understand (An example can go a long way)
Should be included in all purchase or billing communications
Should clearly state the time frame a customer has to initiate a refund
Clearly indicate any shipping or postage charges needed to be paid by the customer
5. Cancel Funnel. (This assumes you are running at least 1 continuity/subscription offer). Your cancellation process should be easy-enough to find (I mean, we don't need to make it that obvious, right?), available on both mobile and desktop, and should address:
The status of your subscription
Current and future billing charges
Confirm the cancellation has been successful by email (with the aforementioned info)
Moreover, the subscriber should have multiple ways of cancelling - by email, phone, chat.
💡Pro Tip: A good cancel flow should answer all of the customer's post cancel concerns and minimize the need to reach out to an agent for additional confirmation.
6. Dispute Alerts and Fraud tools. Depending on the current status of your chargebacks and fraud numbers, investing in 3rd party tools/software that specialize in reducing those numbers can go a long way. Although this usually does come with an upfront cost and a minimum investment, the cost of not being protected often outweighs the price tag. Make sure to look for the following when shopping around:
Products that have performed well in the niche your selling to
Average success rate for preventing chargebacks/fraud
Ease of implementation/Integration
Lock-in period and termination period
Manual versus automated adjustments to filtering “bad transactions”
7. Document, document, then document some more! It's no secret that the frequency of disputes is on the rise (no thanks to COVID) and many issuers are flooded with these requests needed to be quickly reviewed and addressed. Merchants need to be armed by having the necessary documentation readily available when presenting their side of the story. That means keeping an organized history of customer interactions from conversion to customer support interaction. Most CRMs can do this type of heavy lifting for you.
Document and store all transaction and post-transaction interactions linked back to the customer
Have these on hand and ready to use when needed - ideally stored and organized in a CRM
Often time speed is your friend. The faster you provide this the better chance you have at potentially reversing the dispute or preventing further damage.
8. Vet your traffic sources.
Was it Shakespeare who said “Know thy traffic?” Anyway, we can’t recall.
Whether you're using affiliate-based marketing, social media advertising or the other paid methods, it's a good idea to review how customers find their way to your sales page. Vet how other similar offers are being advertised and directed to your landing page. In case of affiliate marketing, it's often good practice to review a publisher's advertising methods (if possible). Being upfront about what you don’t want your offer to be associated with goes along way in preventing churn and disputes. Have a set of rules and guidelines of how you want or don’t want your offer being promoted.
9. Experiment
Did we save the best for last or what? Not sure what the exact impact will be on your chargeback numbers after implementing any of these measures? Well that’s a darn good question.
Run one or some in parallel as variations in an experiment with the key metric being chargebacks. Track your 90 day chargeback numbers and note the impact. You will have a lot more confidence in rolling one of these changes site wide once you’ve seen the data. Pay close attention to how other complementary KPIs are affected as well. These include:
AOV, LTV and Churn Rate
Next Issue: Woah, its our first issue! At least take me out to dinner first. Jokes aside, if you found any of this actionable then I would love to get your feedback on what our next issue should address.
What other insights are you interested in reading about?
1. How experiments can increase your profit and decision power? vote
2. What levers can I use on-demand to decrease my chargebacks? vote
3. How do I set the optimal price point for my offer? vote
4. Want to throw in a request? Reply to this email directly!