Refund Policy for SaaS
Non-physical products such as SaaS applications and other digital products present unique circumstances when it comes to refunds.
In this article, we will outline the requirements for Refund Policies in the SaaS industry and how to a Refund Policy for your business.
Are SaaS Apps Required to Have Refund Policies?
SaaS apps are not legally required to have Refund Policies.
When a consumer purchases a SaaS app, they are simply paying for the use of the app, not purchasing the app itself. Therefore, the nature of this product does not allow for ease of return like with a non-digital product.
While there are no federal laws regarding the requirement of Refund Policies, there are several state laws that require the displaying of your return and refund limitations if you wish to enforce them.
Benefits of Having a Refund Policy for Your SaaS App
Refund Policies can help you build and maintain a solid reputation of reliability and great customer service, while helping your company manage flow of profits better.
In SaaS, your product is not a one-time sale. You have to continue to please the customer throughout their entire experience. Trust, brand loyalty, and positive customer perception are essential to keep existing users and getting new subscribers.
Overall, offering a Refund Policy of any kind can establish the following benefits for your business that have positive economic value:
- Increases business legitimacy and customer trust. The existence of a Refund Policy, regardless of the refund accommodations it allows, shows the customer the confidence you have in your product. Clear cancellation, refund, and fee schedule policies can also sell consumers who may be more likely to purchase without the fear of commitment.
- Saves company time. Disputing refunds and communicating with unhappy customers uses a lot of company time and energy. It is more efficient to have a clear Refund Policy and immediately accept customer requests that comply with that policy.
- Understanding customer satisfaction. Surveys, reviews, and the statistics of customers who request a refund or cancel their service can help you understand customer satisfaction and areas of potential improvement in your company. Learning about customer expectations, experience, and application function from unsatisfied customers is valuable information that can better your company as a whole.
- Boost brand equity. Reputation can be everything for a company. Brand equity refers to the value that derives from a brand's reputation rather than from the service or product itself. It is a powerful selling point and a reputation for unsatisfied customers, and poor customer service experience can significantly impact your business.
How to Draft a Refund Policy for SaaS Apps
There are several important components that should be included in every Refund Policy.
Determine What Can Be Refunded
Analyze your product type, fee schedule and accounting structure to determine a solid and straightforward Refund Policy. These determinations are the foundation of your policy.
It is not recommended to state or suggest in the policy that refunds are determined on a case-by-case basis. Instead, outline clear rules. Of course, if expectations are made in actual customer service situations, that is completely the discretion of your company.
If your application is a subscription, there are several options you can offer customers rather than a full refund of the money they have spent. The simplest solution is to offer free cancellation and once the current fee schedule period is completed, the user will not be charged again. Typically, they can continue using the application until the next billing schedule.
You could also include additional refund opinions regarding funds previously spent on the subscription or prorate cancellations and stop service immediately.
For non-subscription-based applications that required a one-time payment, a refund could more closely resemble that of a non-digital product. Your company could offer a refund of the total price or a partial refund depending on how long they have used the application.
Regardless of what is determined, it must be clearly outlined in plain language in the Refund Policy. State what is eligible to be refunded and how much the consumer can be compensated, if anything.
Freshworks, a cloud-based messaging software, outlines its requirements for canceling its service in its Terms of Service. As subscription-based software, they require notice of cancellation before the next billing period and do not issue refunds on prior billing periods.
Outline When Refunds Are and Are Not Granted
From there, the policy should explain what warrants a refund or a cancellation.
In some instances, you may have a contract with the user that prevents cancelations or specific circumstances of cancellations. If that is the cause, that information should be reiterated here. If no contract is established, consumers will have the ability to cancel at any time and that should be stated.
For refunds, explain any time constraints or guidelines that must be met in order to receive a refund. For instance, users can receive a full refund of the funds spent within the first 90 days of using the application. Guidelines like this look great to a potential customer and can be easily marketed to your advantage.
Lastly, this section can include information regarding if the company chooses to no longer have a customer use their SaaS application. If it is the company's choice to terminate, outline the refund and cancelation process that would follow.
HubSpot CRM platform specifies in their Customer Terms of Service the actions that are prohibited and will initiate termination from the use of the software. The policy is detailed in outlining the prohibited acts, actions that present harm, and suspension for non-payment.
How To Initiate A Refund or Cancellation Request
Instructions for how the user can request a refund or initiate a cancellation should also be included in the policy.
There may be a selection to make or a form to complete before the refund or cancellation can be completed. Many SaaS applications may elect to require an email notice of cancellation to help the company communicate directly with the unsatisfied customer. This can not only aid in understanding the satisfaction issues but can help the company stay organized.
Be mindful to outline this clearly so users do not get frustrated when looking for this information.
The Logistics of the Refund
After a customer submits their cancellation or refund request, there are still a few questions they may have unanswered.
Complete your policy with information that could help users understand the steps that follow such as how long a refund may take to be issued, if the cancellation is immediate or when their subscription will expire and other questions that may arise with your specific company policies.
Where Should a Refund Policy Be Displayed?
There are several appropriate locations for your Refund Policy to be displayed on your website. The information from the policy can also be displayed in a more concise and direct manner in multiple places on your website.
To get the most traffic and visibility, link your policy at the foot of your website, at checkout, and within your Terms and Conditions agreement.
If you think your refund or cancellation information is not sustainable enough to warrant its own policy, you may also include the information within your standard Terms and Conditions agreements as a clause.
If you do not offer a refund, be sure to display that information. A recommended location for optimal visibility of this information is at checkout.
Summary
While Refund Policies are not required in the United States for SaaS applications, digital products, or non-digital products. Some states have guidelines for properly displaying your refund and canceling policies to your customers and potential customers.
Having a straightforward refund or cancelation policy in place that is simple for your users to understand has ample benefits for the public image of your company. When drafting your policy include the following items:
- What can be refunded or canceled
- Guidelines for eligibility for a refund
- How to initiate a refund request or how to cancel the service
- Why the company may elect to terminate service
- Additional specific relevant to your company or your application
If you choose to implement a Refund Policy, also focus on customer service and preventing returns, refund requests, or cancelations. Train team members to understand the Refund Policy as well as work to resolve problems before they request a refund or cancel their subscription.