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.