How to increase revenue through intelligent payments
For some product designers, payments are an afterthought. It’s a given that a consumer will pay for the products… so sometimes payments are just added on at the end. But if a brand wants to leverage the power of payments to increase revenue, an intelligent approach to integrating payments is important.
After seven years of integrating group payments into checkout flows, here’s what we’ve learned about how to increase revenue with intelligent payments.
Start with segmentation
The first step is to segment your customers. Export all carts, both those abandoned and fulfilled, and then pull out those that are the most valuable. Each company is different, but generally the most valuable segments are those with the highest total purchase price compared to the cost of delivering that product or service.
Start with identifying the segments that are most valuable to your own business, so you know the conversion rate for the number of tickets, or perhaps look at quantity and packages.
If you’re a hotel or vacation rental business, you might look at number of room nights booked, or if you’re selling cruises, the number of cabins on a ship. Or you could use the total number of adults.
This gives you a view into the right people to target. Look at your conversion models to inform the geographies that are going to deliver bigger results. Then you can use these personas to estimate conversion rates of specific carts.
One note: your highest converting segment is usually very valuable – unless you’re spending a lot of money acquiring a customer or serving a customer after purchase.
We can’t help you make the distinction within this article, so just be very clear about your actual costs. A faulty assumption on the front-end will lead to a lack of success on the back-end.
Then assign a value to each segment
Now that you’ve identified the most successful segments for your brand, the next step is to assign a value to each segment. This is usually a fairly simple calculation, but can get more complex depending on the business specifics.
The basic formula is to subtract all of your customer acquisition costs, as well as the actual costs of delivering your product or service, from the total purchase price. This is your gross profit, which usually varies by segment, according to how much it costs to acquire a customer with that profile.
The key is to not over-segment. Segments must be relevant business drivers: broad enough to make sense for targeting but narrow enough to represent an actual user group.
For companies that go down this path, the end goal is often to determine the Customer Lifetime Value (aka CLV or CLTV) of different segments.
By knowing how much a customer is worth throughout their relationship with your company, you can easily plan and target you’re paid advertising campaigns to deliver the results you need to meet your business objectives.
Deploy payment testing
Once you’ve identified the segments that are most valuable to your brand, now it’s time to look at how payments can increase conversions for those segments.
For us at Pay By Group, we often present the split payment option early in the checkout flow, especially when a certain segment tends to convert more when offered the option. It’s important to remember payments can be leveraged to persuade a user to complete the transaction.
On average, this approach has led us to increase conversions 27% for the group segment on websites where our buy button is deployed. Potential customers that would otherwise bounce get pulled into the funnel because they know they will not be forced to take on the scary burden of 100% payment or deal with the stress of trying to get paid back, which can itself turn into a nightmare.
Once you can identify exactly what type of payment should be placed at which point in the checkout process, conversions become near-scientific. Your checkout flow is optimized, users are happier and more satisfied, and everyone wins.
By taking the time to implement the process and structure needed to test payments, you too can increase revenue through intelligent payments.
Want some expert help? We have honed our proprietary system to calculate these figures depending on type of business: payments processors, e-commerce, travel… each industry has its own structure. For a full ROI model, email us at email@example.com.