Increase Efficiency, Profits Via Recurring Payments
Acquiring new customers and minimizing attrition of existing ones—in other words, getting and maintaining customers for the long term—maximizes recurring revenue. Combining that with a reduction in operating expenses is the path to discovering your business’ Holy Grail. An important stepping stone in that quest is incorporating automatic recurring payments into your billing process.
Industry Outlook Is Strong
According to recent industry surveys, for 2002, the biggest challenges cited by security dealers/integrators are protecting profit margins and controlling costs. Growing and maintaining recurring revenue income is of paramount importance.
According to a study conducted by Dallas-based Parks Associates (as seen in Security Sales and Integration‘s March 2002 issue), penetration of home security systems is expected to reach 31 percent by 2009, growing from 18 percent of all U.S. households in 2001. Furthermore, it is anticipated that there will be opportunity for dealers to up-sell their customers with additional value-enhancing systems, as growing numbers of residential security systems become multifunctional (meaning they will be integrated with other systems, such as lighting).
These factors, coupled with people’s changed sense of security given recent events, favors expectation for continued industry growth.
Keeping Clients for Life
As competition becomes fiercer, there are several industry trends that are gaining strength and will likely be indicators of the most successful companies.
Cost-cutting measures, particularly in the back office administrative processes, are a top focal point—this would include outsourcing billing and receivables, as well as a trend toward online billing. As mentioned, bundling services is becoming increasingly popular, and is an effective way to increase the average invoice size for installation fees as well as ongoing services and monitoring charges.
Finally, the recognition of the lifetime value of a customer, which includes focused efforts on increasing loyalty and retaining customers, is a predominant trend. Bundling services is one component of a customer-focused strategy, as is offering payment options that meet consumers’ needs. Recurring payments (RP) by payment card (e.g. credit cards, debit cards) can, therefore, be an integral part of the strategy to build your business.
Recurrent Paying Is Easy
Offering your customers RP—a regular bill they can pay automatically by payment card—lets you enjoy guaranteed payments, less paperwork, less exposure to bad checks and fewer write-offs. You can also realize new potential to save time on paperwork and billing, giving you more time to manage and grow your business.
MasterCard consumer research has shown that offering your customers RP not only holds enormous potential for your business, but your customers are very likely looking for this payment option as well. Our findings indicate that consumers are increasingly turning to RP to remove the hassle of manually paying a recurring bill. In fact, more than two-thirds of those surveyed already use this option to pay recurring bills, and 55 percent indicate that they would consider switching providers if RP was offered (all else being equal).*
By enabling your customers to pay you automatically on an ongoing basis—conveniently, securely and efficiently—you are making them happier, which makes for a more rewarding business. This service can turn the otherwise time-consuming chore of bill payment into an invisible, seamless task, leaving your customers with a more satisfying experience. And, it’s no secret that satisfied customers are more loyal. Offering RP can help you preserve and grow your hard-earned customer base.
Raise Efficiency, Profits
Like many industries, you probably bill your customers on a regular basis. This can be time-consuming and expensive – creating invoices, stuffing envelopes, addressing/stamping and mailing invoices, waiting for payment, processing checks, waiting for checks to clear—and the list goes on! By offering RP to your customers, you can save time every single billing cycle. You can also reduce your administrative costs because payments are handled electronically—reducing your paperwork.
This helps to strengthen your bottom line and to grow your business because:
How to Get Started
If you already accept payment cards, as many organizations do for one-time fees such as installation charges, then you are well on your way to establishing an RP program for your customers. Contact the institution through which you currently accept card payments from your customers and inquire about setting up an automated bill payment process.
There are software tools available that will assist you in establishing a billing file for your RP customers. Once set up, you can submit multiple transactions for batch processing, eliminating the need to re-enter your customers’ card account information for each and every billing cycle, thus reducing the administrative time to process invoices and payments.
If you do not currently accept payment cards, the advantages of RP described in this article may provide just the incentive you need. Contact your commercial financial institution for more information about how to set up a merchant account.
Building Awareness Is Key
Once you have set up the automatic bill processing procedures in your back office, the next critical step is to market your program. Tell your customers you are offering this new service and encourage them to sign up.
There are many different ways to do this. A key to success is to not only to tell your customers about this exciting new payment program, but to keep telling them in many different ways. You may even want to consider offering an incentive to encourage them to sign up. Discounts on monthly monitoring fees and complimentary or free trial periods for (new) products or services are two examples. You may even want to consider cross-promoting an offer with a complimentary service provider; lunch or dinner at a local restaurant is just one idea.
Service providers that have been successful in promoting RP to their customers have used awareness and education marketing, and have offered their customers incentives to switch to RP in order to generate interest in their program.
Here are a few tips and best practices that can help you fully leverage an RP program to grow your business:
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