7 Tricks To Chargeback Reduction

One of the greatest challenges Direct Response Advertisers have these days is procuring solid merchant processing.   Even more challenging is keeping it.

Over the past decade I’ve had the honor to work in the trenches with some  truly awesome DR advertisers.  Here are 7 tricks the pros use to keep chargebacks under control:

1.  Verifi.  This service has special contracts in place with almost every major banking institution in the US.  Anytime these institutions receive a chargeback from a consumer, and the chargeback stemmed from an Advertiser that uses the Verifi service, the chargeback is turned into a refund by Verifi.  Hence the consumer instantly receives their money back and the advertiser is not penalized with a chargeback.  That is huge!!

In order to appreciate the Verifi service it is important to understand how it works.  Say for instance a consumer purchases Proactiv Skin Care continuity plan.  They forget to cancel, and because they’re a hillbillie in West Virginia, their bank account gets overdrawn.  Instead of looking in the mirror and admitting to himself that he’s a dumbass, the Western Virginian decides to take a trip down to Wells Fargo and tell his banker that someone made a charge to his card without his authorization – hence he charges back.

Unless you’re a merchant that uses Verifi, your merchant account will automatically receive a “chargeback” penalization due to the consumer’s dispute.  Even though you did nothing wrong, and even IF you win the dispute, the chargeback will still count against you.

BTW, chargebacks originate from the bank where consumers own their credit cards, NOT from your merchant bank.

That’s where Verifi steps in.  Verifi has contracts in place with 6 of the top 20 card issuers, giving them effective control over chargeback reduction.  These banks represent 40-50% of all credit/debit cards issued in the US, and Verifi’s CDRN (Cardholder Dispute Resolution Network) typically reduces chargebacks by 15-20% within the first 60 days. Instead of turning into a chargeback, the dispute turns into a refund.  It’s a win/win for the consumer, merchant, and bank!!

NOTE:  The Verifi service is unreasonably expensive.  Until they figure out a way to lower their prices, a lot of the major players out there won’t get on board.  Come on Verifi – start thinking economies of scale!!

2.  Liberal Refund Policies. There are certain type of consumers out there that will go to the end of the earth to get their money back…even when they don’t deserve it.  As a merchant you have 2 choices when you come across these folks:

Option 1:  Put policies in place to afford them either a partial refund, a refund, or some type of incentive (binky) to appease them.

Option 2:  Tell them to go fuck themselves in some way, shape, or form.  If you choose option 2…well…may god have mercy on your campaign.  Aggressive policies take down merchants.  The most common way is through chargebacks.   Remember, if 1% of your total transactions & 100+ chargebacks hit your merchant account in 1 month, then you’re in trouble.  That is unless you’re processing offshore, a model that I personally don’t agree with.

3.  Make It Easy To Cancel with 24/7 online and offline support.  This is ecommerce 2.0.  Making it hard for customers to cancel is not the way to keep them on board.  Instead focus on creating more value to your clients.  They will in turn reward you by referring new customers and keeping loyal to your service.

4.  Tune In To What Your Customers Want and Make Changes Accordingly.

Over 50% of all new client acquistions in a lead gen company I work with come from referrals…that tells me that we’re doing something right.  To date we’ve yet to receive a single chargeback.

What’s the secret sauce?  We tune in to our client’s feedback and take it seriously, VERY SERIOUSLY!

That’s one thing I really respect about Sam Prokop’s HitPath and Rick DelRio’s LimeLight.  These services put their client’s needs first and demonstate it through actions, not words.

5.  Run A Tight Ship.   One of the greatest businessmen that ever walked this planet was Ray Kroc.  Kroc didn’t come from money, nor did he come into it at an early age.  In fact, if it wasn’t for his gig as a milkshake salesman at 52 years old he never would have discovered Dic and Mac’s Mac Donalds.

After selling Dic and Mac 8 Multi-Mixer machines (the largest order he’d ever received), Kroc took notice to their hamburger business.  His fascination with their operation turned into an obsession…which turned into a burning passion.

Ray Kroc eventually bought MacDonalds and turned it into McDonalds.  He focused 100% of his time on McDonalds, resulting in the creation of one of the tightest ships corporate America as ever seen.  Every process was systemized, all the way down to the way bathrooms were cleaned.  He “minded his business.”

As a Direct Response advertiser, it’s your job to run a tight ship.  Mind your business and pay the deepest attention to every facet of your campaigns.

Top DR firms provide great customer support.  i.e. One client I work with has an entire section of their call center devoted to updating addresses for customers on their programs.  There are full time reps who earn salaries with benefits just to update addresses.  Talk about service!!

 6.  Avoid RMAs. PERIOD!  If you don’t know what an RMA is then you’re better off not knowing 😉

7.  Increase transactional volume.  Club memberships, upsells, and cross-sells are all great ways to add value to consumers while increasing your transactional volume.  Pricing points at $9.95 or less on a continuity basis are proven to work best.