Pricing your product or service is a tough cookie to crack. One dilemma that’s coming up more often is whether to charge your customers a one-time fee (as is traditional), or move towards the direction of recurring payments instead (as is on the rise).
Let’s talk about one-off payments vs recurring payments. How do the two weigh up against each other, and what if…you offer both?
What are one-off payments and recurring payments?
First things first, let’s make sure we’re on the same page in regards to what these terms mean.
A one-off or one-time payment is a single transaction, where the entire amount of the product or service is transacted. As the transaction is completed in one go, there is no continuous relationship established between the seller and buyer.
Recurring payments are transactions that are made repeatedly and periodically over a certain schedule. The billing amount and schedule can be fixed or flexible, but must always be communicated clearly between seller and buyer. Recurring payments include your gym memberships, utility bills and subscription services in general.
How do they work?
One-off payments are simple and straightforward. Be it cash, card or online banking – the customer makes a single transaction.
With recurring payments on the other hand, the customer has to provide authorisation for the seller to credit from their account based on the agreed amount and frequency.
Payment methods which allow automatic recurring billings come in all shapes and forms:
- Standing orders
- Auto debit (from credit or debit card)
- Direct debit (from bank account)
Pros and cons of recurring payments vs one-off payments
Which payment model is more suitable for my business?
Both recurring and one-off payment methods offer considerable appeal. For consumers, recurring payments may be more accessible than higher, one-off payments. On the other hand, many consumers still remain skeptical about allowing businesses to “access” their bank accounts.
But which should your business explore? When making the comparison, these 3 factors can serve as a helpful starting point.
What’s the nature of your product or service like
Traditionally, industries which have been well-served by recurring billing models include media, gyms, software, utilities and subscriptions. Services which can be provided on an ongoing basis allow merchants and customers alike to gravitate towards recurring billings for its “set it and forget it” nature.
Do you have the right infrastructure?
Managing recurring payments can be complex, so make sure to choose a system like Curlec which eases (and ideally automates) the process instead of adding more work on top of it.
What level of customer experience can you provide?
If you’re going to charge your customers on a recurring basis, what guarantee do you have that they’ll stick around? Though the price may be lower, the “feeling” that the merchant is taking money from them every month can make it more difficult to retain customers without good customer service and valuable retention strategies in place.
The Intersection Point
Despite their differences, you don’t have to see recurring payments and one-off payments as two separate black-and-white entities!
Here’s why – Many payment methods used for one can also be used for the other. For example, many may know Direct Debit (withdrawal from a customer’s bank account) for its fuss-free method of collecting recurring payments.
What many may not know is that Direct Debit can also be used for instant one-off payments. At Curlec, these are known as “click payments” and utilise the same mechanism used to setup Direct Debit.
Why stick to one, when you can offer both?
Your customers have varying payment capabilities, hence why both recurring and one-off payments may have their respective places in your business. Instead of committing to just one, offer your customers the ability to make the choice which suits them best.
Curlec offers businesses the ability to charge for one-off payments as well as set up recurring billings – all through a single, seamless system. Scroll down to get in touch with us via the contact form, or discover more about Curlec here!