This blog post is the third 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: BETWEEN CONVERSION AND DELIVERY
This paygate occurs after your contact has converted from prospect into customer but before the delivery of the product or service. (Note the green paygate in the sales funnel, pictured below). This can only occur, of course, when there is a period of time between the conversion and the delivery. The possibility does not exist when conversion and delivery happen at the same time.
Here’s an example of when you see this: In a B2C situation, you might see this in a real estate scenario. The prospect becomes a customer (the conversion) by signing the papers to buy the house; later, they drop off a down payment (the paygate); still later, they receive the house (the delivery).
As for a B2B situation, I actually think you don’t see this very much. I suspect that one of the reasons you don’t see this as much in B2B is because businesses will either get some or all of the money up-front during conversion or they’ll get some or all of the money at or after delivery. It seems inefficient to have this extra step in a B2B scenario of receiving payment after conversion but before delivery. (That’s not to say you never see this paygate location showing up in B2B, but I think the predominant B2B paygate location is post-delivery, which we’ll talk about in a few days).
Why would a customer prefer this paygate? This model works well for large purchases because it actually helps the purchase to seem manageable. If prospects converted to customers AND had to pay for a large purchase right away, it can seem overwhelming, which can be a deterrent. However, by separating the buying process into smaller steps, it is much more manageable, especially when there are a lot of moving parts (as in a complex real estate transaction). By signing first and paying later, the customer can enjoy the sense of ownership for a while before having to hand over their cash. I believe this increases their likelihood of gathering the money they need and handing it over.
I mention large purchases above because I’m not sure it works as well in smaller purchases. Smaller purchases can rely a little more on impulse because the combination of converting and paying with a smaller dollar amount are not as overwhelming to a customer. However, a magazine subscription might be a good example of this paygate location. You order the magazine. They send you a bill, which you pay. Then you receive the magazines.
If you have a larger purchase, consider using this paygate to help soften the obstacle of purchasing. If you use this paygate but are getting a lot of non-payers, increase the amount of communication you have with your new customers between conversion and the paygate. Make them feel welcome and give them added value before they pay.
Why would a business prefer this paygate? Like the paygate I discussed in a previous blog post, this one eliminates receivables because the money is obtained before delivery. And although it can add an extra step and a bit more work (to convert the customer and then to collect payment later) it can increase sales, especially with those who might otherwise resist the purchase when conversion and payment are combined.