Use Physical Products to Increase Profits & Reduce Refund Rates
September 2nd, 2010
Written by: Allen Baler, Guest Author
There’s no question that ClickBank vendors face increasing challenges these days, including:
- Higher refund rates, even if your product is solid
- More competition and “copy-cat” products
- Higher traffic costs, as well as the risk of getting “Google slapped”
- Super affiliates demanding higher commissions and bonuses
Smart ClickBank vendors are addressing these challenges by taking advantage of a relatively new, under-the-radar feature in ClickBank; the ability to offer their customers physical products such as DVDs, CDs, or printed books.
These “hard copy” versions can be offered as an upgrade, upsell, or even included free with every digital order.
Why Should ClickBank Vendors Offer Physical Products?
Many vendors think that physical products are too complicated to set up, are too expensive to produce & ship, and require too much administrative time.
The truth is that physical products can significantly improve an info-publishing business’ bottom line and is usually well worth the effort!
Based on our experience in developing and managing the physical products programs for top ClickBank vendors over the last 2 years, vendors offering physical products have increased net profits as much as 28%, cut refund rates to as low as 1.5%, and have increased customer satisfaction. These results have had a powerful impact on these vendors’ overall bottom line.
Here are the top 5 benefits we have seen with ClickBank vendors that have implemented physical products:
#1) Significantly lower refund rates
How many times have you had a customer refund because they were having trouble downloading your product? Or had a customer ask for a refund because they were confused because they saw a “virtual product shot” of a book or CD on your sales page and thought they were getting something physical, not a digital file? Offering a physical product component to your offer can eliminate both problems and will significantly reduce your refund rate.
#2) Higher perceived value among prospective customers
Your digital products might be state-of-the-art and contain great information, but for most of your customers there is significant perceived value to receiving something tangible in the mail that they can actually hold in their hands. This allows vendors to build the value and legitimacy of their products.
#3) Differentiation from the competition
By offering physical products, you offer greater value to your customers than your digital-only competitors. Discerning customers who are shopping and comparing offers will often decide to buy from you because you offer “more bang for the buck” than a competitor who only has a digital product.
#4) More money per visitor
Physical products work great as an upsell or post-sale purchase! Conversion rates can be as high as 30% and top vendors who push a significant volume can add many thousands of dollars in incremental income with their physical products. Increasing your profit per visitor enables you to afford higher bids for traffic and test “slap-free” traffic sources.
Here’s a tip that can jump-start the sales of your new physical product: offer your new physical version to prior customers who bought the digital version with a discounted price for a limited time. A couple emails is all it takes to get a nice surge of sales and we’ve seen these promos convert as high as 40%.
#5) Easier to attract super affiliates to promote your offer
Adding more money to your bottom line through physical products means you can offer higher commissions to your affiliates and offer bigger bonuses to attract super affiliates. Also, your lower refund rate will attract the smart affiliates who recognize the huge impact of refunds rates on affiliate ROI, especially for those affiliates who drive paid traffic.
How Do You Get Started Offering Physical Products?
OK, hopefully you are starting to see the benefits, and now you want to learn more about how to actually implement it.
The truth is that adding physical products to your digital info-publishing business does require set-up work plus ongoing maintenance. Creating, producing and shipping a tangible product can be a very different experience from the all-digital world most ClickBank vendors are used to operating in.
Here are the 3 steps to get started offering physical products:
Step 1: First you’ll need to create your physical product, such as artwork and files for CDs, DVDs, layout for a printed book, etc. It doesn’t hurt to spend a little extra time and money making sure everything is polished and professional, for example by designing a nice cover or including an informative insert. Remember, this product represents you and your business! Use the highest resolution artwork and video/audio files as possible since production specs for physical printing and viewing videos on TV need much higher resolution than for the web.
Step 2: Next you’ll need to produce your physical products. You can do it yourself which is a good option when starting out, or there are companies out there that can produce CDs, DVDs, and printed books at relatively low cost. Start with small initial production quantity so you avoid inventory risk and cash flow problems of investing in a lot of product upfront. You will also need to decide how you are going to package and ship your physical products to your customers. Again, you can do this yourself or there are companies that can handle this for you.
Step 3: Finally, you will need to set up your customer service process to incorporate the physical product aspect of your business. You will need to be able to communicate with your customers about their shipments, send them tracking information as well as set up a process for handling product returns and refunds.
The good news is that ClickBank has been making the process easier for vendors by recently adding tools and features to support “shippable media” products. This makes a lot of sense as ClickBank benefits directly from lower refunds, more successful vendors and happier consumers.
Here’s The Bottom Line…
Top ClickBank vendors have proven that offering physical products yields a significant boost to their business by increasing profits as much as 28% and cutting refunds as low as 1.5%.
No, it’s not a magic pill. Yes, it does take some extra work.
But the results can be well worth it.
So if you own a digital product and want to add incremental sales and cut your refund rate, consider developing physical versions of your products now!
About the Author
Allen Baler is the owner of Reboot Fulfillment, a company that since 2008 has designed, sold & shipped over 200,000 physical product shipments as the strategic partner of top ClickBank vendors. To learn more, watch the video presentation on how to increase profits with physical products.
About Molly LaneMolly is the Marketing Specialist for ClickBank and shares insider tips, industry best practices and the latest updates on ClickBank features designed to help you earn more with Internet marketing.
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You’re right on the money with that. From personal experience I can tell you that physical products can greatly benefit your venture. Any vendors looking to seriously improve their clickbank ventures, would definitely need to consider offering physical products.
Allen took care of the design, shipping and handling of the physical version of Magniwork, and did a fantastic job. I can personally vouch for him.
Dan Verchakowski
Magniwork
Allen, great article. I think you’ve made a believer out of me. All of my products are digital and many of our customers have indicated they would be willing to pay more for shippable media so we need to take them up on that offer!
Fair article.
One correction, regarding this:
“[...]as set up a process for handling product returns and refunds.”
Why would we want to setup a process for handling product returns and refunds?
Isn’t that a job best suited to a retailer?
Your comment makes no sense whatsoever.
(1) Product Returns
There is no need for a customer to return a product to receive a refund. ClickBank clearly stipulates that NO returns (of any kind) are required for a refund to be processed. Why waste resources asking for the customer to return something?
(2) ClickBank handles refunds.
Why would the vendor want to become an intermediary between the retailer (ClickBank) and the customer as it relates to the issuance of refunds? ClickBank sends their customers an e-mail after payment with relevant links for customer service (of which one option is to request a refund).
Otherwise fair article, as mentioned before.
Thanks for any comments or clarifications regarding the above two items.
@Dan: Thanks for the kind words and congrats on your success with your top 20 Clickbank product!
@Susan: Glad you’re now a believer.
Customer feedback is a great indicator that physical products are a good move for you to get started.
Here’s an interesting stat… according to GetElastic research (http://www.getelastic.com/research-persuasion/) 41% of US software consumers stated a preference to have a physical CD or DVD of their software shipped to them rather than download their purchase. That’s a very easy (and profitable) upsell offer for a product owner.
@Nameer: Thanks for your questions & comments. You nailed it when you said that selling physical products is like being a retailer. This is why it can be a different world that Clickbank vendors are used to and requires some of the systems and procedures of a retailer, like handling returns, sending out tracking #s for packages, etc.
You asked why would a vendor ask for a return on a physical product and get involved in the process rather than let Clickbank issue an automatic refund without a return… I’d say because the vendor doesn’t want to go out of business.
Physical products have real hard costs for every item sold, unlike a e-book. If you purchased a $50 item from Amazon and wanted to get a refund, they would definitely require you to return the item 1st.
This may be helpful to folks… Clickbank recently published their guidelines on physical products here: http://www.clickbank.com/help/vendor-help/vendor-tools/shippable-media/
Allen
We worked with Allen since a while with one product that is performing great. Allen’s service helped us maximize revenue while decreasing refund rate. I give a sincere recommendation to that.
I had a 8-10% refund rate before I started using a CD-ROM and now its below 2%. That adds up to a lot when you are selling 100+ a day. Customers are happier and affiliates have a higher ROI. I used Allen to get everything set up and it was super easy. We charge $5.95 for S&H and that covers not only our shipping but also the CD-ROM itself. Win, win all the way around.
Byron Walker
I have often used physical products to increase my conversion rates as an affiliate. I have found that not only does this work well from the publisher perspective, but can also make a dramatic increase in profits for affiliates.
The reality is that no matter what product or service you are selling you will have competition. The successful Clickbank affiliates are the ones that are able to stand out from the crowd.
hmmm never thought that physical product yields higher sales percentage..
interesting article, but it’s so hard to find a non-clickbank digital product..
@Ciprian & @Byron: Thanks for chiming in with your thoughts and recommendation, and congrats on your success with both having top 100 Clickbank products!
@Matt: Excellent point about using physical products as an affiliate to stand out from the crowd. One strategy we’ve used is to create a complementary bonus product that supplements or fills in the gaps of the product we’re promoting, and offer it on a CD, DVD or printed report. This helps increase affiliate conversions and stand out from the crowd.
Here’s a quick case study of this… one of our clients offered their physical product as a bonus in their affiliate promotions of a high-ticket internet marketing course that launched in August. Customers ate up the bonus offer and my client earned $90K+ in affiliate commissions. The physical product bonus helped my client stand out from all the other affiliates promoting the same offer.
@Adam: Thanks for your comment. I definitely recommend Clickbank as the premier place for selling or promoting digital products.
ClickBank should clarify something…
Allen mentioned:
“If you purchased a $50 item from Amazon and wanted to get a refund, they would definitely require you to return the item 1st.”
Does the rule that Allen mentions which is apparently applicable to Amazon also apply to ClickBank?
May a customer be required to return the item first, before a refund is issued?
This is a very, very important question. Allen is implying that yes, the customer may be required to return a product first. Can someone at ClickBank confirm this?
Nameer,
ClickBank vendors who sell shippable products are expected to create shipping notices whenever they ship a product to a customer. If they have followed this procedure and have provided shipping information for a particular order, ClickBank will not refund the order until the customer provides similar information showing that they’ve shipped the product back (i.e., a tracking number or delivery confirmation).
If the vendor does not include shipping notices with their orders, however, then ClickBank will treat the return like we do for a digital product, and we will initiate a refund request that the vendor has 24 hours to respond to. If the vendor neglects to include shipping information, then we similarly don’t require shipping information from the customer before processing a refund.
Hope that clears things up a bit.
Beau, I’m still confused.
Here’s what ClickBank’s policy states:
“[...]creating a shipping notification for your order will ensure that a refund request for your product will not be processed for 7 days, compared to a single day for digital products, giving you more time to receive the product back from the customer before the refund is issued.”
Source:
http://www.clickbank.com/help/vendor-help/vendor-tools/shippable-media/
It’s my understanding, based on the wording above, that ClickBank will NOT reject a refund request but merely DELAY it for 7 days. Regardless, the refund WILL be issued after 7 days. I do not see any wording specifying that the customer has to do anything beyond request a refund.
Just to be crystal clear — not withstanding the above wording from ClickBank’s own website, you’re telling us that ClickBank will reject a customer refund request for a physical product for which a shipping notification has been created unless the customer requesting the refund provides information “showing that they’ve shipped the product back” (to quote your exact language).
Thank you for taking the time to clarify this, it is appreciated!
I think that most physical products has less refund rates as generally people’s mind set is that they are too lazy to get out of their house to return the item and make an effort.
I am excited to read this article. I have put together a memberships website for a guitar method which contains a digital version of the book originally created by the author (currently not in the CB Marketplace yet). Not to toot my own horn, but I put in a lot of time and effort to turn it into a digital product which looks great and all, but is still missing that one flair of being a physical product where guitar players could actually carry it around in their case and take it out to use or show people as necessary. The copy I printed out and put into protective sleeves to show people is killer and I want people to get the same effect when they look at it as well instead of having to be stuck at their computer with a guitar on their lap at the same time.
Being able to add in an upgrade or include in the price both the digital version as well as the physical product is great! Now I just need to find a company willing to print at a reasonable cost to me (as it is about 100 pages of color), so that it will help me out, as well as provide affiliates with a respectable commission and not require the customer to take a loan out to afford it. Unlike many of the Gurus who have their monthly magazines published for low costs with high numbers, I am now quite there yet as teh membership is just getting underway.
@Beau: Thanks for clarifying!
@Adam: Yes, I agree with you that is a factor in the lower refund rates vendors get with physical products. I also think it gives the customer some extra time to take a fuller look at the the product rather than go for instant buyer’s remorse.
@David: Congrats on your new product, it sounds really cool! Yes, there are some markets and products where a physical version makes so much sense and yours in a good example. A prime example is health & fitness, where customers prefer to have a hard-copy of the meals plans and recipes and work-out routines in their kitchen and at the gym. Another is software, where customers prefer to have a safe copy on CD-ROM in case of computer crash or upgrade.
Feel free to contact me via my site (http://rebootfulfillment.com) and I’d be happy to give you some tips on how to best source your book when starting out.
Nameer,
We recently changed our policy to allow vendors who’ve created a shipping notifications to wait until they receive the product back from the customer before processing the refund (this is done on the vendor’s side). The refund is no longer automatically processed after 7 days, and I’ve updated the Shippable Media Help Center article to reflect this. Vendors who do not process refunds in a timely manner after receiving the product back may have their ability to sell shippable media products revoked.
Just to be clear, if a customer contacts ClickBank (for example, saying they shipped the product back but never received a refund), we have the ability to process a refund at any time. Although we believe these instances will be rare, it’s a consideration when choosing to do business as a shippable media vendor. We have to have this policy in place to avoid chargebacks.
Hope that helps!
Yes, I do agree that physical products has less refund, as most buyers do not want to take the trouble of shipping back the item.
Good post! I was actually planning this already but am yet to find a good company that can turn our products into shippable media and send it anywhere in the world.
I remember reading something about a company that can do this for about $5 per dvd/cdrom but cannot seem to remember the company’s name.
Does any one have any suggestions for purely dvd’s/cdrom?
Cheers,
Ethan
@Ethan: Thanks for the feedback! Hit me up via the contact page on my site (http://rebootfulfillment.com/) and I’d be glad to share with you my list of recommended DVD/CD manufacturers.
Allen
My question is this: How can you – your company – charge people that want to come and work for “you guys?” It sounds to me like another scam…. and a terrible thing to do at this difficult time of recession, bordering on “Depression.” Somebody should report “you” to: The Better Business Bureau, or wherever you report scams like this — in Canada or the USA!
Summed up in the bottom line increasing profits as much as 28% and cutting refunds to as low as 1.5%, that is reason enough to engage in physical products. The data they have reflects this and only if you don’t want those percentages to reflect on your own then stay digital.
Kirk,
Our clients aren’t working “for us.” They’re working for themselves. We only make money from affiliates when actual sales are made, meaning that the affiliate has made money. There are some devious companies out there who sell “work from home” courses that charge people money and then tell them to sign up with ClickBank, but we aren’t associated with those programs at all. They just point people in our direction because affiliate marketing is a good way for independent entrepreneurs to earn money online.
Hi Everyone! Is it possible to have a physical up sell which is not considered a physical digital media? Let’s say, I sell a digital ebook about getting 6 pack abs. Can my upsell be say a nutritional supplement? Thanks very much. Never hurts to ask, right?
Hi QuizN,
We currently don’t allow any kind of physical upsells to customers besides shippable media. You can always offer these to the customer in subsequent contacts with that person, but not through ClickBank.
Beau