Aaron Hoos

This blog post is the fifth in a series called Sales Funnel Paygates – a strategic look at where in the sales funnel your payment transactions can be placed. (See the introductory blog post in this series for more information).

SALES FUNNEL PAYGATE: AFTER DELIVERY
This paygate occurs after your customer has received delivery of the product or service you sell. (Note the green paygate in the sales funnel, pictured below).

This is a classic B2B model: Businesses that sell to other businesses might convert their business contact into a customer, deliver the product or service later, and then invoice the client after delivery.

This paygate model is also seen frequently in the B2C world, too. You see it in utilities like power, water, cable, telephone, internet, and credit cards. And you see it in services like car repair, medical services, plumbers, electricians, accountants, etc.

Why would a customer prefer this paygate? Business customers like this model because it allows them to first acquire the things they need to conduct business in order to earn enough money to pay for those purchases. For business customers, it’s all about generating cash flow first. Consumers may prefer this model because they can own and enjoy the service first and delay the pain of purchase until later.

Regardless of whether you are a B2B or B2C business, if you use this paygate model, you run the risk of having receivables. Some businesses accept receivables (and the work they can take to collect, and the inevitable losses that come with it) as a cost of doing business. But receivables can be a costly — and even dangerous — part of your business. If you aren’t used to working with receivables or you don’t like doing it, this paygate model might not be right for you.

Why would a business prefer this paygate? Businesses that sell to other businesses will find this paygate model can help them make more sales. That’s because their B2B customers may not keep a lot of cash on hand but they are willing to cut a check later after they’ve received money from their customers. Businesses that sell to consumers might prefer this model because they can’t charge a fixed price up-front. Perhaps they have use-based fees and need to first deliver to know how much to charge.

Like other paygate models that delay payment, businesses like this model because it reduces the barrier to purchasing. Lots of customers (especially consumers but also business customers) want to own the product or service and will decide later how to pay. They don’t have to have the money when they convert or when they receive delivery, thus they can own the product or enjoy the service without worrying about the money. This “buy now, pay later” method helps to increase sales.

This blog post is the fourth in a series called Sales Funnel Paygates – a strategic look at where in the sales funnel your payment transactions can be placed. (See the introductory blog post in this series for more information).

SALES FUNNEL PAYGATE: AT DELIVERY
The next paygate location we’re going to cover is payment at delivery. Pictured below, you’ll see the green paygate at the delivery step of the customer stage.

I believe there are negligible differences between this paygate location and the previous one – paygates between conversion and delivery.

For B2C scenarios, this paygate location offers the same benefits: The ability for the customer to feel like they have some control over the purchase (which tends to increase the likelihood of a purchase). It’s also an attractive paygate for customers who want to hold the purchase in their hands before they pay. Cash-on-delivery purchases, including things like pizza delivery and mail order, use this paygate location.

I don’t think we see this paygate location used as frequently in B2B scenarios as we might think. As you’ll read tomorrow, there is a far more common paygate location for B2B.

Why would a customer prefer this paygate? The biggest reasons are convenience and control. The customer wants to be able to conveniently order when they want and only pay when they receive the item (and pizza delivery is a good example here). And, the customer wants to feel some sense of control over the transaction – intending to withhold payment if the product or service isn’t delivered to their satisfaction.

Why would a business prefer this paygate?Businesses like this because it can increase sales by reducing the barrier to purchasing: It puts off the need to pay while accelerating the sense of ownership for the customer, thus encouraging sales. But just as important is the sense of control for the business: They can deliver the product or service but not fully deliver it until the customer actually ands over the money.

If your business has a lot of receivables, consider using this model to continue encouraging sales while reducing the amount of non-paying customers. If your business struggles with sales and you are demanding cash up-front, consider switching to this model, which is still a risk-minimized business model.

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