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Direct Debit Pricing

Disciplines > Marketing > Pricing > Direct Debit Pricing

Description | Example | Discussion | See also

Description

When offering a subscription or some regular purchase, include a price for using direct debit, where the customer allows you to directly draw on their bank account or other payment system (such as credit card). Payments may be set up to occur annually, monthly or on particular occasions, such as the release of a new product.

Make this a competitive and attractive discount on the normal price, perhaps even giving a gift of some kind as a further enticement. Also make it very easy for the customer to set up, with options by paper, email, web and phone. Promote this visibly, spelling out the benefits for the customer using such phrases as 'set it and forget it' and 'quick, easy and free gift!'.

If there are problems in setting it up, make sure you can easily and smoothly get corrections from the customer and, as necessary, unwind the process and release the customer.

Example

A camera magazine offers a 25% discount on the cover price for setting up a direct debit payment. It also includes a camera bag as a free gift.

A utility company offers no discount on electricity payments, simply the convenience of paying without the hassle of sending mail or being cut off due to late payment.

A vehicle recovery service sets up a tent in a shopping area, where a friendly representative helps new customers fill in the requisite forms.

Discussion

Direct debits are often much cheaper to operate. They will have an initial cost but a much lower maintenance cost. The major advantage, however, is that customers who pay by direct debit are far less likely to cancel their orders. Doing nothing is much easier than arranging for a payment and is far more painless.

The rules for how direct debits can be used vary between countries and regions, and perhaps even banks, so always be aware of the constraints, both when setting them up and in taking payments. You may need to warn customers of money being taken or prices changed, for example.

Some companies make it deliberately difficult to cancel a direct debit, adding charges, delays or other difficulties. They work on the principle of 'lock in', such that customers will give up or not even try. This can work to sustain revenues but can also lead to customer revolt and may tread close to the edges of legal acceptability.

Direct debits are also known as 'standing orders', 'debit orders', 'autogiro' and 'credit transfer'.

See also

Discounting