We’ve never had a lot of chargebacks (a chargeback is when a customer calls their credit card company to dispute a charge they don’t recognize), but last year we made a simple change that reduced our chargebacks by 30% as a percentage of sales.
I can’t be certain the reduction is entirely due to this technique, but we didn’t change anything else related to how we deal with chargebacks.
Background
One of the issues we have at 37signals is that many people know our product names better than they know 37signals. They sign up for Basecamp or Highrise without knowing that there’s a company called 37signals behind the product.
So sometimes people see a charge on their card from 37signals but they don’t know what it’s for. And even if they did remember 37signals, they still may not recognize the charge.
We also sell more than just our web apps. We sell job ads on the Job Board and Getting Real as a $19 PDF. So we sell a lot of different things at a lot of different price points, but the line item on people’s credit card statements always look the same.
We’ve recently gained the capability to change the charge statement entry to reflect the product being charged (“Basecamp” for a Basecamp charge instead of “37signals, LLC.”), but for various reasons we haven’t enabled it yet.
2007
When we charge someone’s credit card, “37signals, LLC” used to appear on their card statement. We also included a phone number that played a recording explaining the charge. This was alright, but it didn’t feel good enough. Ideally we’d have a live phone number, but we’re just not set up to take customer support calls at this time. (we’re entirely email based).
2008
I was thinking about how we could do a better job explaining a charge, but we were only allowed a limited number of characters on the customer’s billing statement.
According to the merchant/card rules:
Your company name/DBA section must be either 3, 7 or 12 characters and the product descriptor 4, 8 or 13 characters.
That means we could do something like:
37signa*Basecamp 800.xxx.xxxx IL
or even…
37s*Basecamp 800.xxx.xxxx IL
But that doesn’t help a whole lot either. It’s definitely better than just 37signals or just Basecamp, but it’s still not as clear as I’d like it to be.
If you don’t use a product descriptor (“Basecamp” or “Backpack”), you get 22 characters. So I decided to register 37signals-charge.com, redirect it to 37signals.com/charge, write up a page explaining why there’s a charge on your card, and put that URL on people’s charge slips instead of “37signals, LLC” or “Basecamp” or “Highrise” etc.
Now when someone buys something from us, this line item shows up on their credit card statement:
37signals-charge.com 800.xxx.xxxx IL
Visiting that URL takes you to this page where we explain the charge, the products, some suggestions if you don’t recognize the products, and a link to our billing support form someone needs additional help.
Quick win for 30% less chargebacks
So while chargebacks in raw dollars are up because sales are up, chargebacks as a percentage of total sales were down 30% in 2008.
And the best part about it is that it only took one day to implement this change. Register a new domain, then call the merchant card company to update the message on our customer’s statements, write up a page explaining the charges, and set up a redirect on the server. Simple.
Ryan Graves
on 28 Jan 09For a new startup (mine) with a subscription based product, how important is it to get a separate vendor for billing clients? We currently are using PayPal alone. We are very young and haven’t really realized what will be best yet.
Thanks.
Chad Garrett
on 28 Jan 09This is from experience with clients (web designer speaking), but PayPal is notorious for flagging cards as fraudulent even when any other processor will accept. This reduces fraud, of course, but causes inconvenience for a lot of valid users. On the other hand, for a low volume of transactions, it’s hard to beat the rates. PayPal is at least recognizable on the credit card statement, since it usually involves signing up for a PayPal account.
Robert Gaal
on 28 Jan 09I want to argue that “37signals.com/charge” would be better. If I see a domain name on my overview that I don’t recognize, phishing is the first thing that comes to mind.
JF
on 28 Jan 09Robert: We weren’t permitted to use the ”/” character which is why I didn’t go that route.
GeeIWonder
on 28 Jan 09Good stuff.
James
on 28 Jan 09Good solution.
Just curious, but why?
Ignacio
on 28 Jan 09Simple indeed, I just wonder why you registered a new domain instead of using charge.37signals.com
JF
on 28 Jan 09Just curious, but why?
Primarily a load of paperwork. We have to move over to a new platform which requires a lot of signatures and admin red tape.
James Avery
on 28 Jan 09Very cool, but doesn’t seem to be working for American Express. Here is the charge I see on my statement from 12/26/08:
37 SIGNALS 8XXXXXXX6CHICAGO IL XXXXXXXX Description Price COMPUTER EQUIP/SOFT 12.00 Reference No: XXXXXXXXXXXX
Chi Mike
on 28 Jan 09You registered a new domain…who do you recommend using to register with?
steven
on 28 Jan 09Great post. Thanks for sharing this.
Jason: Did your bank or gateway have to verify this new domain or change in the account information after your modifications?
“Primarily a load of paperwork. We have to move over to a new platform which requires a lot of signatures and admin red tape.”
James
on 28 Jan 09@JF
Ah, OK – paperwork and red tape are good reasons not to do just about anything!
mike echlin
on 28 Jan 09This is a great solution that any online business could apply. Think about how many new users you would need to match the 30% chargeback savings that goes directly to the bottom line.
Charlie Jones
on 28 Jan 09I’d be interested in some metrics (pageviews) on the page. For curiosity’s sake more than anything else.
John
on 28 Jan 09I’m curious why you thought the “37signa*Basecamp 800.xxx.xxxx IL” approach wasn’t a good one. It’s ugly, but informative; if you’ve bought Basecamp and you see that, it’s immediately clear what it is, without having to go to a computer and visit a web site to find out. I’d expect that from a customer POV it would be a superior solution.
JF
on 28 Jan 09John: 37signa•Basecamp doesn’t really work because a lot of the people who get the bill aren’t the same people who signed up for the product. The accountant may get the bill, for example. Happens quite often.
So 37signa•Basecamp is greek to them. At least with a URL they can try to visit a web site and find out more. They may not even do that, but at least 37signals-charge.com isn’t a dead end like “37signa•Basecamp” is a dead end.
Sean Iams
on 28 Jan 09It may also help to put your product logos on the right or left gutters of 37signals-charge.com.
That way the curious customer will know almost immediately what the charge is for without reading any text at all. If they need more detail, then they can read on.
Christophe Franco
on 28 Jan 09The idea is good, but I think a shorter domain name would be better, since it seems there are some banks that shorten the line…
For example, in my (French) bank, all I get is : 37SIGNALS-CHARGE CARTE xxxxxxxx
PAIEMENT CB xxxx 49,00 USD(I’ve put “x” instead of the numbers that identify my credit card number)
So the only part of the domain name I can get is “37SIGNALS-CHARGE”, which is probably still too short for someone who never heard of a subscription to some product from 37 Signals.
I think you could improve a bit by trying a domain name that would be about 12 to 15 caracters, extension included. Trying a domain name with a 2-letter extension could be a way to save one, but could also trigger unnecessary fears for some people… Why not “37S-PAY.COM” or “37S-BILL.COM”?
Will
on 28 Jan 09What a bizarrely arbitrary set of rules! If you can use 12 characters, why can’t you use any number less than or equal to 12 (same with 13).
It’s like the Payment Processors are trying to make these things hard to read by forcing all but those whose names fit exactly in one of those 3 sizes to obfuscate who they are and what they did.
Great info on your process though, and a great idea for the solution – thanks for sharing.
Eric Anderson
on 28 Jan 09I like the idea. Once you do decide to go through with the paperwork to have per-product descriptions you could consider doing something like:
So basically each product would have it’s own page explaining the charge so the user would know exactly the product it is for.
Joe Mako
on 28 Jan 09To me, this would seem like a better URL. What was your reasoning to select a whole new domain name instead of using a sub domain name?
I also second Sean Iams’ recommendation to add your logos to the page as well. Maybe reuse the format on http://www.37signals.com/support (add the link to a billing support request above your support hours, and your product logos instead of company logos).
In your current format, the little box with a green border looks out of place. Thankfully you redirect to your primary domain because if the URL stayed the same, I too would consider it a scam.
Claus
on 28 Jan 09Also of note: If chargebacks are higher in raw amounts but 30% lower per income $, revenue rose by more than 42% in 2008.
Wayne
on 28 Jan 09@Claus: I think you misunderstand what Jason is saying. He said chargebacks decreased by 30% as a percentage of sales. So, if their chargeback rate was 1%, then now it is 0.7%.
A 30% chargeback rate would be unacceptable to all credit card processors and you get your merchant account cancelled.
Dan Boland
on 28 Jan 09Simple indeed, I just wonder why you registered a new domain instead of using charge.37signals.com
I was thinking the exact same thing.
Jason M. Lemkin
on 28 Jan 09The next step to consider at least for clients paying > say $100-$200/month is to get a contract signed for them. It’s far easier to win a chargeback dispute if you have a signed contract as the cc companies require proof of having authorized the charge. My guess at EchoSign electronic signature (www.echosign.com) is 10-20% of our customers use us at least in part for this reason.
Michael Sigler
on 29 Jan 09So I was all excited to show my wife, the finance ninja, about this. I think it’s pretty clever. She actually wasn’t surprised and said quite a few online companies are using it, though only a few take you to a specific page like yours.
I really enjoy seeing simple solutions like this, and especially glad others are following similar patterns. I’ll see if I can get her to find some other examples.
Gabor
on 29 Jan 09You might want to include a list of your price points on the 37signals.com/charge page. E.g. if you see a charge of $19, it’s probably the PDF of “Getting Real”.
StartBreakingFree.com
on 29 Jan 09Great example guys. I think I saw a Google charge on my credit card which also referenced a url.
I hope other merchant account providers start to make this API available to change the description.
@Will – I agree, sounds like a legacy system with such weird character limits
Simon Nielsen
on 29 Jan 09I work at a payment solutions company and saw this on my card statement a couple of months ago. The card statement is definitely a thing causes a lot of chargebacks – often its confusing and not the same name at all as the product purchased.
I think this is a very nice way of helping out the customer. Its a friendly reminder of what the charge is about and the customer will feel that you went that extra mile to ensure clarity.
Claus
on 29 Jan 09@Wayne No I didn’t misunderstand anything. The math still works out. If the statements in the post are correct.
Nick
on 29 Jan 09Great post, something I can apply to my company. Thanks!
@claus I am really not following you either but trying to understand… can you elaborate?
Anonymous Coward
on 29 Jan 09@claus is saying: if chargeback rate was reduced 30% and absolute chargeback $s are up, the scenario looks like this:
sales $s -> chargbacks as percentage of sales -> chargebacks $ $100 -> 1.0% -> $1.00 $144 -> 0.7% -> $1.01
There is at least 42% increase in sales.
Anonymous Coward
on 29 Jan 09@claus is saying: if chargeback rate was reduced 30% and absolute chargeback $s are up, the scenario looks like this:
sales $s -> chargbacks as percentage of sales -> chargebacks $
$100 -> 1.0% -> $1.00
$144 -> 0.7% -> $1.01
There is at least 42% increase in sales.
Brian Kaldenberg
on 01 Feb 09This was just a brilliant idea. I’m implementing into our billing process ASAP.
Martin Baker
on 01 Feb 09Absolute genius. Love it.
Micha
on 01 Feb 09Good Stuff !
Stefan Seiz
on 02 Feb 09Suggestion: get your big product icons into the top of your http://37signals.com/charge page. I often have problems recognizing charges too, but when i visit the chargers website and recognize their logo, i immediately get it. Funny enough, there’s no visual product branding on your charge page. Use the power of your brand and i am sure you can reduce chargebacks even more (as IMHO, most people really don’t like to read long text).
Gagan D
on 03 Feb 09great idea! and I agree with @Stefan’s idea about adding product logos, it will hep make people not have to read the page and just visually skim it.
P.S: you got some funky characters showing up on your billing support request page: http://img.skitch.com/20090203-qd2bk1j3jrgqc5bf66ixjm6hq.png (FF3/Mac)
Jeff
on 03 Feb 09Hmm, my bank shows only “37 SIGNALS”
This discussion is closed.