How Airbnb turned a bad deal into a winning hand

Humans are risk adverse by nature. It probably comes from the days when we risked being chased down by a sabertooth tiger whenever we ventured outside of our caves.

Entire industries and product lines are built around this fact: insurance, hedge funds, home alarms, and many more. If you’re in one of these businesses, you want to play up the dark side of risk, however, most of us aren’t in a business that benefits from heightened risk. We’re in businesses where we want our customers to feel no or minimal risk. And, this is doubly true when we’re trying to establish new customers.

There is always a risk associated with anything new. How do you lure new customers out of the comfort zone associated with the product or service they have been using for years and try yours? There’s an old adage, “Better the devil you know than the devil you don’t.”

Risky business

Nowhere is this problem bigger than when you’re trying to establish the legitimacy of a new business model. When a new business model finds a successful way to minimize the risk experience for consumers, we can all learn a lesson.

The recent experience of some friends brings this to mind. They were headed out on vacation to visit family and friends. When they went to make hotel reservations, they were shocked by the prices. They couldn’t find anything under $300 a night and didn’t want to spend that much money.

They decided to see what they could find using Airbnb. A little background is in order here. This couple is older, Baby Boomers, in fact. While I’m sure than many Boomers have been happily using Airbnb since it launched, I think it takes more convincing to make them believers.

In any case, the couple found a great property. The price and location were ideal. They made the reservation and then started to look forward to their stay.

The dreaded call

The bad news didn’t come until much later. While they were only hours away from checking into their Airbnb, they got a call from the property owners: There was a plumbing problem that wouldn’t be repaired until the next day. There was no water, shower, or toilet in the property.

The property owners were very apologetic and my friends were sympathetic; they had once owned a motel so they knew that things like this can happen. They cancelled the reservation and found a hotel room. They knew that their payment in advance would, of course, be returned.

Here’s what surprised them: Two days later they got a call directly from Airbnb asking about what alternative arrangements my friends had made. If they had to pay more for lodging, Airbnb said to take a photo of the receipt, send it to them, and they would refund the extra cost as well as the original cost of the Airbnb stay.

With one fell swoop, Airbnb eliminated much of the risk of using its service. My friends told me that they would certainly give Airbnb another try.

Money talks…

Generous money-back guarantees, paying for return shipping, and other risk-minimizing tools are virtually always worth it in the long run. But there are some caveats you need to recognize.

First, the systems assuring the quality of your products and services should be first rate. This minimizes your risk of refunding too much money. Second, you need to communicate your policy well enough that prospects fully understand and internalize it. If it’s in the fine print, or it takes a customer service call to reveal your policy, you won’t experience its benefit to your business growth.