How to build a transparent membership refund policy

A fair membership refund policy is an essential aspect of managing any membership business

A fair and transparent membership refund policy is an essential aspect of managing any membership-based business or organization. It defines the terms and conditions under which a member can request a refund for their membership fees.

This is particularly noteworthy at the moment: the Federal Trade Commission, the body in charge of protecting consumers in, is looking to formally impose upon creators, publishers and media companies a ruling that it is as straightforward for consumers to cancel a membership as it is to sign up.

The buzzword is ‘click-to-cancel’: the cancellation process should be possible in the same number of steps or fewer, and found on the same website, as the sign-up process. Here at Memberful, where we help to power membership sites for our customers, if someone wants to cancel their account with us, it’s as simple as navigating to the Account tab and clicking Close Account.

Eyal Avital from our Customer Happiness team says: “We’ve found that a clear and transparent refund policy builds trust with our customers’ members and demonstrates a real commitment to their satisfaction. Additionally, this reduces the risk of credit card chargebacks and disputes, which is important to maintain your Stripe account in good standing.”

In this guide, we will discuss the importance of a clear membership refund policy and its key components, and best practices for crafting a fair and transparent policy that will help maintain member satisfaction and protect your business.

The importance of a transparent membership refund policy

A well-defined membership refund policy is crucial for several reasons:

• Member satisfaction: A transparent refund policy can foster trust and goodwill between your organization and its members, leading to higher member satisfaction and retention rates.
• Legal compliance: Having a clear and accessible refund policy helps ensure that your organization adheres to applicable laws and regulations.
• Dispute resolution: A well-documented policy can help prevent disputes and facilitate their resolution, should they arise.
• Risk mitigation: By outlining the terms and conditions of refunds, you can minimize the potential financial impact of refund requests.

Eyal says: “It’s understandable to have the inclination to obscure or not offer a refund policy to protect your recurring revenue. This may seem like an effective strategy but ultimately members will look for a similar offboarding experience as their onboarding. Anything less may leave them unsatisfied, resulting in sharing negative reviews or possible chargebacks.”

Components of an effective membership refund policy

An effective membership refund policy should be a easy-to-find page on your website that includes the following key components:

• Eligibility: Clearly define who is eligible for a refund and under what circumstances.
• Timeframe: Specify the time window within which a member can request a refund.
• Refund request process: Outline the steps that members must follow to request a refund, including any documentation or proof required.
• Refunding payment process: Detail how refunds will be issued, such as via the original payment method or as a credit toward future membership fees.
• Exceptions: Identify any situations in which your organization may deviate from the standard refund policy.

To make sure the policy is fair and transparent, outline the eligibility criteria, timeframes, and processes in plain, concise and ambiguous language that is easy for members to understand.

You might wish to consult legal counsel for your membership refund policy

At this point, larger companies might wish to consult legal counsel but a good place to start for everyone is to research the refund policies of similar organizations and applicable laws in your jurisdiction. This will help you understand the industry standards and legal requirements.

Communicating your membership refund policy to members

Your membership refund policy needs to be not only fair and transparent but easily accessible and regularly updated. As with everything, effective communication is key! Here are some crucial elements of communicating your refund policy:

• Accessibility: Publish your policy on your website and in your member handbooks, ensuring it is easy to find.
• Clarity: Use bullet points, highlights, bold text, or headings to emphasize important aspects of your policy, making it easier for members to understand the key information.
• Onboarding: Make sure new members are aware of your refund policy right from the outset. Include a link to the policy in your welcome email or as part of the onboarding process.

Include a mention of your refund policy in the membership onboarding process

Eyal says: “One of our previous customers decided not to advertise any sort of refund policy or offer any sort of clarity on their member FAQ page. Sadly, this resulted in a high volume of disputes that ultimately led to their payment processor shutting down the account.”

• Timeliness: Make sure to remind members of your refund policy through emails, or other communication channels – especially during renewal periods.
• Responsiveness: Be prepared to answer any concerns and questions that members may have about your policy. Provide clarification when needed; be informative and not persuasive.

Keeping your membership refund policy up-to-date

Regularly updating your membership refund policy is crucial to ensuring its ongoing effectiveness and compliance. Here are some things to consider:

• Evaluate feedback: Solicit feedback from members about your membership and its policies and make adjustments based on their suggestions and concerns.
• Review trends: Keep an eye on industry trends and best practices, adjusting your policy to stay competitive and aligned with member expectations.
• Update comms: When making changes to your policy, ensure that all relevant communications are updated, including your website, member handbooks, and email templates.
• Notify members: Inform members of any significant changes to your refund policy via email. Provide them with ample time to adjust to the new terms: around a month if possible.

Handling disputes and exceptions

Despite having a clear refund policy in place, disputes and exceptions may still arise. Here are some strategies for handling these situations:

• Listen and empathize: Take the time to listen to the member's concerns and empathize with their situation, demonstrating that you value their membership and want to find a fair resolution.
• Review the policy: Revisit your refund policy to determine if the member's request falls within the established guidelines or if an exception may be warranted.
• Document the interaction: Keep a detailed record of the dispute, including the member's concerns, any supporting documentation, and the final resolution. At Memberful we use Intercom) to document all interactions with customers.
• Be consistent: Ensure that any exceptions made are in line with previous decisions and uphold the integrity of your refund policy.
• Learn and improve: Use disputes as an opportunity to review your policy and identify areas for improvement or clarification.

Listen to member's concerns and empathize with their situation - make them feel valued

On this last point, see the interaction as a chance to grow, not make life difficult for others. The Membership Geeks put it succinctly when they said: “Don't feel uncomfortable asking people why they want a refund. You may be surprised with the reasons that they give you… Someone wanting a refund isn't always because they think your website is low quality, or they don't think they've had value for money.”

Conclusion: How to build a membership refund policy

A well-crafted membership refund policy is an essential asset for ensuring member satisfaction, legal compliance, and effective dispute resolution. By following the best practices outlined in this guide, you can create a fair and transparent membership refund policy that benefits both your organization and its members. Remember to keep your policy up-to-date and maintain open lines of communication with your members to ensure ongoing success and positive member experiences.

Eyal concludes: “Your members won’t always remember the onboarding experience. However, a poor offboarding will stick around and get shared with others. If you advertise a positive member experience, continue that theme as they move elsewhere. Be thankful, kind, and respectful and you’ll open an opportunity to receive feedback as to why they canceled, which can be used to improve the product and overall user experience. Maybe eve win them back as a member in the future!”

Here at Memberful we have always believed that it should be simple and hassle-free to cancel a membership. If someone wants to cancel, let them do so easily; don’t create more obstacles. Be helpful and gracious – a beneficial interaction will mean that the customer/member will more likely come back to you at a later date. Supporting customers throughout their journey is good for business — even if they cancel or leave.