Terms of Use for digital products
A Terms of Use agreement for digital products will need to explain your licensing terms and any digital rights management (DRM) protection that you have for your product (if you plan to use DRM).
Your licensing terms should set out what the license grants access to, any costs, the length of the license, and any other license conditions your users must comply with.
DRM is when a digital product is physically secured by restricting its use outside the terms of the license. For example, you could limit the use of a digital product to a certain number of uses, within a defined time period, or to a specific type of device (e.g. iPhone only).
Here’s an example of a DRM term from a digital product from the Terms and Conditions.
Finally, if your digital product allows the interaction between users, you need to ensure that your Terms of Use agreement has clauses targeted at managing user behavior. Part of this means being able to ban offending accounts, and you need to set out what kind of behavior can result in a ban.
Due to the unique nature of digital products, these type of clauses are important to include in your legal agreements.
Including good licensing terms and DRM clauses, setting up a thorough Refund Policy, as well as clearly establishing your Privacy Policy terms will help to ensure that your customers feel confident and clear on their entitlements when they buy, download and use your digital products.
Return/Refund Policy for digital products
A Returns and Refunds Policy is important for any situation in which you are selling goods and services, regardless of whether or not they are digital. This kind of policy can affect your customer retention.
However, digital products can’t usually be returned, as they are downloadable, licensed, or accessed on a subscription basis.
This means that the primary way for your customers to deal with any problems is to ask for a refund, or for them to cancel their subscription altogether.
In some cases, digital products can be repaired, such as by releasing a software patch to fix any bugs. These things all need to be covered in your refunds policy, as well as specifically noting that your digital products are not returnable.
Here’s an example from the Return Policy of McGraw Hill Education in relation to some of their digital products:
You can see that McGraw-Hill Education explicitly state that digital products are not eligible for returns, but can be refunded or exchanged within 10 days.
When you consider the refund period for your digital products (e.g. 10 days), think about what the product is and how much time a customer might need to be able to assess the product and its compatibility, functionality, and quality.
For example, a product that has a full demo advertised on your website would have a shorter refund period (because the customer has already been able to see a full demo) than a product that is more complex and requires compatibility with other programs or products.
If you’re giving customers refunds, you may want to budget for this in your financial accounts, as well as considering any chargeback fees you may be subject from your bank or payment processor.