Continuity merchants are embracing the benefits of recurring billing to stabilize cash flow, reduce expenses, and increase sales.
Continuity businesses are quickly catching on that many consumers prefer to pay on a recurring basis. This has long been the business model for online subscription services, newsletters, memberships & or software providers. Increasing, the recurring payments are being used for all types of products and services.
With recurring billing, consumers pay for goods and services on a regular basis, most commonly monthly payments. This lets you count on a steady stream of income throughout the year once you've acquired a customer.
Yet, managing recurring transactions is easier said than done. Many businesses struggle to set in place the right payment infrastructure to handle these transactions.
If you operate a business that relies on recurring transactions, here’s what you need to know:
Direct marketing companies can offer subscription and regular sales in a number of ways. The most common tactic is to offer a free trial initially and then convince the customer to sign up for the service on an ongoing basis.
This is effectively the strategy used by a lot of new companies. Experts understand that subscription services and recurring transactions are increasingly replacing the traditional ‘pay-per-product’ model. Netflix offers unlimited streaming, Amazon Prime offers unlimited books or services, Dropbox offers cloud storage and Loot Crate offers monthly boxes.
There is a fundamental shift in the way consumers want to pay for products and how companies can package them. From a marketing perspective, these services take advantage of a growing preference for what Seth Godin calls ‘permission marketing’. From a financial perspective, regular and stable cash flows are immensely valuable for the long term sustainability of the business.
This has encouraged a number of businesses to offer ways for customers to receive goods on a regular basis. The model involves recurring transactions that continue till the customer explicitly asks to stop receiving the service.
While this may be a convenient and effective sales strategy, auto-replenishment and negative opt out sales tactics have been closely monitored by regulators. Most businesses that adopt these sales practices do not appreciate the regulations that apply to them.
The US Federal Trade Commission is primarily responsible for regulating the sales practices of companies in the country. A report by UC Berkeley analysed the effects of these marketing strategies on consumers and businesses. The study found a number of benefits as well as areas of concern. The FTC has d based on the findings of such studies.
Here are their guidelines for companies that offer negative opt out sales programs:
These basic guidelines are meant to ensure that companies limit the number of credit card processing failures. These guidelines are very basic recommendations for the firm, but there are more extensive guidelines for payment processors who can help your businesses accept recurring transactions.
These payment processors are tasked with following strict guidelines so that the recurring transactions are completed smoothly.
Payment processors who specialize in this field offer their services in the form of continuity merchant accounts. These accounts are specially designed to help your business accept recurring payments while following all the regulations.
Echecks are the most popular alternative payment method for US shoppers. Millions of Americans regularly pay for goods & services with echecks.
Echecks let you easily accept payments by electonically debited buyers' bank accounts. Funds are automatically settled to your business account.
Echecks are particularly effective for recurring billing. And protect cash flow in a far more effective way than cards.
Each year 1 out of 5 cards are reissued due to expired dates, lost & stolen cards, and a variety of other reasons. Each time a card is reissued, payment info must be updated. An expensive and time-consuming process.
Compare this with echecks:
Once a bank account is established, it rarely changes. It's simply too much of a hassle to change a bank account to which direct deposits of wages, monthly debits of household bills and other transactions are associated.
As a result, payment data rarely needs to be updated. Recurring payments consider uninterrupted until the customer cancels. Stabilizing cash flow, increasing productivity, and eliminating an unnecessary reason to contact a customer, which can result in a cancellation.
Payment processors can offer accounts that are designed for recurring transactions. These accounts offer all the security and regulatory features you’d need to navigate through the complex world of online payments.
Payment processors must meet all the regulatory guidelines to be able to offer continuity merchant accounts to businesses.
A continuity merchant account with echeck processing lets you accept regular payments with ease. Accept checks online through a secure API. Take check by phone, mail & fax orders with a virtual terminal.
The more payment options you offer your customers, the more sales you'll make. Echecks give customers another safe & convenient way to buy from you.
And, and far more effective to protect your recurring billing revenue than are cards.
How is your continuity company handling recurring payments?
Contact us today to learn more.