Sales funnel paygates: Paygates at conversion (series)

This blog post is the second 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).


The first paygate location possibility we’re going to talk about is the paygate at conversion. This is when the act of conversion from prospect into customer includes payment. (Note the green paygate in the sales funnel at the point of conversion, below).

One example might be the purchase of a ticket at a movie theater or the purchase of a meal at a fast food restaurant. The prospect may still be a prospect when they walk into the cinema or the fast food restaurant, but when they place their order they have to plunk down their money at the same time or they don’t receive delivery (of the movie tickets or the Quarter Pounder Meal Deal). Concurrent with their conversion from prospect to customer, there’s a paygate.

Although I’ve given two retail examples, this paygate location isn’t ONLY used in the retail world. Consultants or freelancers might require full payment up-front when the customer signs the contract. Manufacturers might require full payment up-front before they even consider retooling their factories. Shipping companies might require fully payment up-front before they send out the truck. Granted, we don’t see this as often in the B2B world as we do in the B2C world, but it does exist. (In the B2B world, if there is any money at conversion, it’s usually a portion of the payment… but I’ll talk about that in a future blog post).

Why would a customer prefer this paygate? This model works well in situations where customers know exactly what they are going to get and feel confident that the product or service will be valuable, or in situations where customers feel that they have sufficient recourse to get their money back if they are not completely satisfied.
If a customer has any hesitation about the value or their ability to get a refund, they either won’t convert or won’t pay.

If you use this paygate, and you have a lot of prospects who aren’t converting or a lot of customers who commit but disappear without paying, this paygate could be part of the problem. Consider reworking some of your marketing material to improve on the sense of value you express about your product or service, and take another look at your guarantee.

Why would a business prefer this paygate? This is a good model for business owners because it eliminates accounts receivables completely and ensures that each purchase is fully funded. It helps to keep your bookkeeping fairly tidy because anything that leaves inventory has some income associated with it, and therefore you can measure your expenses accurately.

If you have a lot of receivables, consider switching to this paygate to eliminate them.

Sales funnel paygates

Paygates are what I call those moments in your sales funnel when your customer has to hand over their money to you.

For some entrepreneurs, they just put their paygate in the place that is the easiest or fastest or least likely to turn into receivables… but are those the right reasons?

In fact, there is a lot of strategic thinking that needs to go into where you place your paygates in your sales funnel — perhaps more thinking than you might first realize! Paygates aren’t just an arbitrary thing that you stick into your funnel because you have to. They require some thought to strategically place them where they make the most sense.

This week, I’ll be blogging a series called “Sales funnel paygates“, and we’re going to explore several possible paygate options to help you decide what is right for your business. (Edit: Now that the series is complete, I’ve posted links to each post in the series at the bottom of this post).

And just to help focus us a little, I’m going to limit our discussion to paygates that occur inside the customer stage of a sales funnel only! (Yes, there are times when a prospect or even a lead might pay some money to you without actually becoming your customer).

So, for this series of blogs, imagine a simple sales funnel and zoom in on the customer stage.

Within that customer stage there could be many steps but let’s simplify it for our discussion and say that there are just three steps: The conversion from prospect to customer, the delivery of the product or service, and the transition from customer to what I call the evangelist stage, where the customer becomes a repeat customer and a loud proponent of your business.

So, we’re focusing in on just three steps in the customer stage…

There are a few other things you should know before we start, which might help your understanding of sales funnel paygates:

  • Paygates are not bound by time or geography. You can convert your customer and immediately deliver or it could take months.
  • It could be just you doing everything (selling, delivering, etc.) or it could happen with a team.
  • Conversion could be simply the customer committing to the sale or signing on the dotted line, or it could be closely tied to a payment of some kind.
  • Delivery could be a one-time event or spread out over years (such as the case of a major software installation).
  • Delivery could be a product or service.

There are many possibilities but if you boil it all down, you end up with conversion, delivery, and then the transition.

So, to get ready for our sales funnel discussion this week, think about how you define “conversion”, “delivery”, and “transition”.

Post-series edit:
Here are the blog posts in the paygate series:

Put down that coffee: A wake-up call for small businesses

In the movie Glengarry Glen Ross, Alec Baldwin’s character shocks the office by telling Jack Lemmon’s character to “put down the coffee. Coffee is for closers.”

Although Baldwin’s character’s sales management and motivation methods leave much to be desired, he definitely highlights one critical point in business that is true of any business anywhere: Closing is paramount.

That’s probably not news to you or to the millions of other entrepreneurs out there. But what many people forget (or perhaps don’t realize) is that they won’t close if they don’t sell.

Let’s step into the classroom for a quick lesson:

  • Marketing: This is generally the promotion of your business and its products or services in order to gain attention, generate leads, turn those leads into prospects. Your message here is: “Hey, we might be able to help! Please listen to what we can do for you.”
  • Sales: This is generally the process of presenting a specific offer to a specific prospect and asking them to buy from you. Your message here is: “Hey, we are the right solution for you right now. Please buy.”

See the difference? Now here’s why many small businesses fail: Marketing is fun and easy and creative. You can market a lot and there are many marketing channels to use. Sales is difficult. It’s time consuming and can be costly. There are fewer sales channels. It can even be embarrassing (when you don’t know the answers or when a customer says no or gives an objection you can’t overcome). It’s really hard work. Most small businesses fail because the owners spend a lot of time marketing (that’s good) and avoid the selling (that’s bad).

Both marketing and sales are very important to the growth of your sales funnel and your business… but only one has a direct impact on cash flow. You can and should market your business but if that’s all you do, you might as well pack it in.

Businesses grow because of sales. That’s it.

Devote a lot of time to marketing because that will fill your sales funnel and give you the opportunity to make sales.