Setting up a cancellation policy is a bit of a tightrope walk. The need to balance between protecting yourself, while also making sure your customers are both satisfied and comfortable may have you a bit stuck. You may be unsure of how to properly word the policy, or may not know where to even begin constructing it.
To ease the difficulty, here's a primer for developing the perfect cancellation process—one that customers will love, but also provide you a safety net.
1. Clarity is key.
Paying attention to the wording of your cancellation policy is critical for communicating effectively with your customers. Define exactly what the customer can expect in the event of a cancellation and provide some reassurance that they will be taken care of to the best of your ability. The clearer you are, the better.
Pilgrim Tours, a wholesaler of travel packages, does a phenomenal job of being as clear as possible with their cancellation policy. On the Terms and Conditions page of its website, the company outlines exactly what service fees and refund amounts the customer is eligible for based on when they cancel: “Cancellation in writing must be received by Pilgrim Tours 91 days prior to departure for a refund of deposit minus service fees." The company then lists further details: "91+ Days Prior: $100 Per Person Service Fee • 90-61 Days Prior: Deposit Amount • 60-46 Days Prior: 40% of tour cost • 45-31 Days Prior: 65% of tour cost" • 30-8 Days Prior: 85% of tour cost • 7 Days Prior or less: 100% of tour cost"
Another great example comes from PriceTravel.com, a third-party booking site, which clearly outlines its cancellation policy for activities on the 'Help' section of its site, stating: “Cancellations made three (3) or more days prior to the scheduled time of the activity will incur a 10% charge. Cancellations made less than two (2) days prior to the scheduled time of the activity will incur a 100% charge. There are no refunds if you are not present at the activity meeting point ('no show') or to transport you to where the activity takes place. Some tours and activities can't be canceled."
2. Communication and early notification are vital.
Full disclosure will prevent miscommunication and customer disputes once payment has been processed. Being transparent about your cancellation and refund policy will create a sense of trust. Over time, this could lead to repeat business and even referrals to family and friends, which is important as studies show that, on average, loyal customers are worth ten times as much as their first purchase. Make your policy available to the customer either online or within a paper document that they sign ahead of time, which ensures they review it in detail before they even make a payment.
Of course, some things are just out of your hands. Whether due to bad weather conditions or because a tour or show has been cancelled, cancellations may also come from your end. So make sure you have a system in place to notify customers within 24 hours of the activity date, or within 72 hours with the option to rebook immediately. You'll also need to decide how to coordinate a full refund. Having a designated employee available to handle these types of communications with customers will help.
3. How to protect yourself.
Many tours, activities, and experiences require the merchant to pay a booking fee or deposit for the guide, musician, or talent well in advance. This is a cost to your business and may or may not be recoverable in the event you do not have enough attendees, or if a significant number of attendees or participants choose to cancel. Some ways to offset these types of costs related to cancellations:
- Implement a non-refundable cancellation policy for certain events such as shows, performances, and other activities that require the merchant to pay a fee in advance to coordinate the event. Make sure the non-refundable policy is prominently displayed during the checkout process and also within any email confirmations or communications you have with the customer. Consider having customers agree that they understand the purchase is non-refundable under any circumstances before payment is processed.
- Set a time frame for granting refunds so that customers can only request a refund up to a certain date before the tour, event, or activity. This can reduce the risk of cancellations and help you recover some of the costs before a certain time frame.
- Determine whether a partial or full refund would be more appropriate. Granting the customer a partial refund — such as 50% of the purchase price — if they cancel within a week or 72 hours of the event or tour may help to ward off cancellations.
4. Reflect well on the customer.
More likely than not, a customer has to cancel due to extenuating circumstances, be they health, personal, or an unfortunate scheduling conflict. That's to say, they haven't changed their mind about experiencing your tour or activity. So, sweeten the pot a bit for them: should they cancel within 24 to 48 hours and you can't offer a refund, offer the chance to book an experience free of charge (or highly discounted) sometime down the road. This shows them you truly value them as customers.
Developing and implementing a detailed cancellation policy is an essential, though somewhat excruciating, component of good customer service. But, using the right finesse, you can show you value your customers while also protecting your bottom line—a true win/win.