Why Roger Does No Networking: The Power of Recurring Payments

by Sean D'Souza

Right outside my front door is a guy called Roger. And Roger has almost zero-cash flow problems.

He also happens to have no need to go to networking meetings

And no need to do any advertising or marketing whatsoever.

You see, Roger mows the lawns. And he’s got a revenue-generating system that most businesses never seem to wrap their heads around.

Netflix.com has the very same system

If you own a DVD player, and you need to feed the machine’s insatiable appetite, you’ll quickly find an ‘all-you-can-eat’ DVD supply at Netflix.com.

All you have to do is pay your fixed subscription fee, and you know the rest. You’ll get DVDs delivered to your home. And picked up from your home. Yeah, without lifting a finger. But in case you missed the point, there’s a remarkable similarity between Roger and Netflix.com. Yes, we both know what it’s called. It’s called the recurring monthly fee.

Your telephone company does it.
Your insurance company does it.
Your local council taxes do it.
Netflix does it.
Roger does it.
So why don’t you?

Recurring payments don’t work in your business, right?

Right. And recurring payments don’t work in the movie business too. No, not the Netflix business–The movie business. As in, ‘We’re all off to the movies, with our popcorn and our ice-cream cones.’ When was the last time you went to the movies like clockwork? You never have, right?

Well, the guys who run the cinemas know that, so guess what they offer you? Yes, the 10 Movie pass. Suddenly, you’ve bought up movies for the whole year. Suddenly you’re eating way more popcorn than you’d bargained for. Suddenly the pelting rain outside doesn’t seem to make such a big difference, because hey, you’ve got a ‘f-reeeee’ movie pass.

And the same concept applies to a web designer, or a restaurant or a barber, or whether you sell products or service. In fact, recurring payments are more than just a gimmick. It’s a system that creates multiple levels of marketing and consumption for your business.

So how does the system work?

Let’s say you run a restaurant. Now a customer who likes your food, is likely to come back many, many times. So why not sell the customer a ‘restaurant pass?’ Out of the blue, the customer will suddenly make your restaurant her favourite. She’ll be dining there at your restaurant; treating friends and clients. Now, now, slow down and notice what’s really happening, and what the client is doing for you.

1) Creating cash-flow for your business in advance: The customer is paying through a recurring system. This means the money sits in your account on a pre-arranged date. No more running around like a headless chicken to get payments.

2) Creating consumption: The law of consumption roughly guesses that if you sit in the same seat twice, you’re more than likely to sit in the same seat thrice. And then make the seat your favourite seat. The same law applies to eating out. The more a client eats at the restaurant, the more likely they are to repeat the action.

In order to take full advantage of the restaurant-pass, they’re now eating more often at your restaurant than most others. While they’re eating, they’ve become more comfortable with the staff; with the menu; with the ambience. And yes, got into the habit of consumption. Even if the customer cancelled their recurring payments, they’d still be more likely to visit your specific restaurant, than any other.

3) Creating referrals: Because the customer has got these so-called ‘pre-paid’ meals (and are more comfortable with your restaurant) are more likely to bring friends and clients along. You don’t want me to spell it out to you, do you? Ok, ok I will. Yes, you sell the friends and clients, the same ‘restaurant pass’. And now everyone and their dog, seems to have your ‘restaurant pass’.

Doesn’t this set you up for chaos?

What if everyone decides to eat there all at once? Um, you weren’t paying attention. Have you ever seen an overbooked cinema hall? Oui, once your restaurant gets too popular, you work out reservations. This kicks in one more psychological factor. Now, not only are you getting a nice bucketload of payments; not only are you creating consumption; not only creating automatic referrals, but also creating a factor of want.

If the customers don’t reserve, they may not get seats.
Suddenly that darned seat which no one is sitting on, is the most coveted space of real-estate in your city.

But what if you’re a web-designer or sell products? Surely this doesn’t apply to you, right?

Let’s see…

Web Designer: Does your client need upgrades and information on tracking, search engine optimisation, etc., at least thrice a year?
Arborist: Do the trees grow back? Silly question, eh?
iPod Dealer: Does the iPod worshipper not want another acccessory? And can’t you sell this person a year-long accessory pass?
Consultant: Can you not do a quarterly ‘warrant of fitness’ for your customer?
Dentist: Do you actually believe your customer is going to come back in 6 months for a check up?
Information Products: Can you not sell a series of educational systems? Or have a membership site of sorts?
Hairdresser: My blonde hair is turning black. My black hair is turning grey. I need a new look. I need a haircut, yada, yada, yada.

Oooh, so you’re getting the idea, aren’t you?

Well, one more thing, and I’m out of here. You know pretty darned well how value-conscious your customers are. They aren’t going to pay you the pesos, unless you give them value. Well, here’s how you create value. Give them a bonus. Or a deal. Try not to give discounts. Try to give them a bonus instead.

So if I were to plonk you back as the restaurant owner, you’d be giving your clients four extra meals, for instance.

Don’t give them a $50 discount. This is because the four extra meals will cost you less than $10. But the perception value is still well over $50. As far as possible, avoid the discounts, and give bonuses instead.

So the next time you hear the sound of a lawn-mower, you’re not hearing the sound of a lawn-mower. It’s the ‘chweet’ sound of recurring payments.

Listen carefully. And do something about it.

Next Step: Read More Psychological Tactics? Subscribe : Get UpDates via RSS | Get UpDates via Email (Fill in your details in the top-right hand form)


{ 2 comments… read them below or add one }

Paul Wolfe January 8, 2011 at 7:29 am

I love implementing this strategy with either Membership Site strategies or fixed term teaching courses. It works really, really well.

If memory serves me correctly I think you were the one to put me onto this strategy in teh first place – back in September 09.

So that’s another guinness I need to line up for ya…

Reply

Jack Godfrey January 19, 2011 at 10:03 pm

I use recurring payments at the yoga studio. The more months you commit to at one time the lower the price per month.

1 x month
2 x month
6 x month

The 6 month pass is slightly less expensive than the 2 month or 1 month. The person is accepting the risk of how many times they will be able to make it to class in the future to receive the reduced price.

My goal is to move everyone to the 6x month pass. This results in uniform income flow for the studio and a commitment on the part of the student to attend classes regularly. We both win.

Reply

Leave a Comment

{ 1 trackback }

Previous post:

Next post: