Most companies have a pricing policy that leaves very little room for giving a customer his or her money back. The ones that have that space normally do so because they are aware that their product is not what they make it out to be.

I discussed the cost of losing a single customer in "Short term Decisions ". And this is something you should always keep in the back of your mind.

Both approaches are equally dangerous. I won’t explain the problem with selling a sub standard product under the pretense of it being more than it is. You will however never be completely error proof in your business. You will always have customers with legitimate problems, and they should always be taken care of immediately.

Before you consider any major purchases or investments, put enough of a buffer away so that you can quickly and easily give a customer his money back should they be dissatisfied. Building this financial buffer into your financial model means that you will always have the ability to correct a problem and hopefully avoid bad will.

No one likes having made a purchase that they are dissatisfied with, but if they are met with no argument and a quick fix, this will often turn into a Positive relationship builder as opposed to a negative experience.

Take the small hit up front. You will gain a loyal customer that comes back, and brings friends.