The benefits of installments

JMorrow asked in the last post about whether it makes sense to offer installment payments on larger product offerings. The answer is almost always: Yes, definitely.

I have tested products with and without installments, and without exception, installments increase response by anywhere from 33% to 100%. In the case of one of the sites in this case study, response was 0 until I offered installments, and then response started to grow rapidly.

You want to make it as easy as possible for someone to order. Installments do precisely that. Compare $190 with 4 installments of $47.50. Even though both are about the same, your eye goes to $47.50. Plus, people feel like they have less risk. If they are not satisfied or get burned (this is their mind, not what actually happens), their risk is only $47.50 not $190.

Some guidelines:

- Anything ending in $7.50 is a good number to use, although I’m not sure why: $47.50, $97.50.

- Some upscale or business audiences don’t need installments and don’t want them.

- I don’t give out certificates until someone is paid in full.

- Watch for credit cards expiring before installments will be paid and ask the customer up front the best way to handle that. Some will just pay the full balance.

Yes! Use installments.

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  • JMorrow

    Thanks for the response.

  • http://www.deanclatworthy.com Dean C

    I don’t know of any payment gateways or store systems that support payments of installments? Maybe you could give us an insight into how you manage this Andrew and if you use a bespoke solution :)

  • aneitlich

    Dean,

    http://www.1shoppingcart.com lets you set up recurring billing. You can set up the installment amount and number of installments for any product you offer. It is a very nice and intuitive system, and includes tutorials. I use them (and receive no payment for making this recommendation, nor am I an affiliate).

    Alternatively, if you build a home grown solution, make sure your hosting company supports “cron job” billing. For instance, I know that http://www.lunarpages.com does, so long as you have a dedicated server. They don’t allow the wget command (and here I’m getting out of my range of knowledge) unless you have a dedicated server.

  • Anonymous

    - Anything ending in $7.50 is a good number to use, although I’m not sure why: $47.50, $97.50.

    Taken from wilsonweb.com:
    Odd-even pricing takes advantage of human psychology that feels like $499.95 is less than $500. Studies of price points by direct marketers have found that products sell best at certain price points, such as $197, $297, $397, compared to other prices slightly higher or lower. Strange, we humans!

  • http://www.onalaskaweb.com onaweb

    I have had pretty good results with installments, a few clients that I might not have had a chance signing – did so because I allowed them to pay over time. I always think, getting paid in little amounts over the next year is better than not getting paid at all.

    However I did get burned on one situation. I signed the client, he paid a couple months down and then began making payments and was very consistant – no late payments and I never had to remind him. However when he had about 4 months left, he ended up getting divorced, closed the business and moved across the country. Never was able to track him down – I actually never really persued it. I did some checking around but never turned him over for collections.

  • http://www.dewebtimes.com dewebtimes

    I dont know about Anything ending in $7.50, but yes have tried something with $99 or $49. hope this also works good. Will also try one with ending 7.50