Pay in instalments or a quick payment discount?

I'm thinking about offiering payment incentives to clients, and would appreciate your thoughts on what the most attractive financial incentive would be.

The majorty of our clients who want a mobile website are in the hospitality sector, where the standard price for creating an additional mobile website to include tabbed menus and a slideshow, is £600 plus VAT. 

The options are:

• Payment within 7 days of creating the website - 30% discount
• Payment within 14 days of creating the website - 20% discount
• 2 instalments of £300 plus VAT - 1 upon completion of the site, plus 1 equal instalment a month later

Your thoughts would be appreciated. Thank you.

Why not take payment upfront?

We offer a free draft of the mobile site so prospects can 'touch and feel' their own mobile phone before they commit. This has worked for us so far and we've had tremendous feedback on the quality of our sites, but getting payment seems to be a different story. It's currently taking about 4 weeks to convert into sales, so I'd like to speed up the process.

I sold websites for a few different companies and you're totally right - payment was always an issue, well a perceived issue at the very least.

If you're offering to build a draft site before any financial commitment I would certainly take payment upfront.

When you say it's currently taking 4 weeks, what exactly do you mean? Is this for the client to get their act together for content? For you to get payment after completion.....? 

When I worked for a web design company here in Southampton I ran a spreadsheet of all my orders, whenever I'd taken full payment upfront the site would be live in an average of 9 days. When I took 50%, it took on average double this time! Interesting stuff from that alone.

Thanks Adam, that's really informative. The problem with mobile websites, that I've found to date anyway, is that it's still quite a new concept that an awful lot of peope still haven't heard about. Therefore dangling the carrot and offering a site they can actually see the benefits of, I thought was the best option. We've converted 21 websites in the first month of trading, but only a handful have converted into paying customers even though every single one of them has given fantastic feedback. 

The turnaround time relates to completed draft through to payment. 

Ok, this is what I'd do if I were you. (Obviously there's more to it and I don't know all the steps within your business...)

The process:

At Pandora we do this for you Mr prospect:

1. We have a chat etc etc, get the brief, design/functionality yada yada...
2. We then build you a draft website which you get to touch and feel, just like the real website.. (and we do this for you because this is a new technology.)
3. If you're happy with the draft site, we take 50% upfront, and then we get coding for you...
4. Once the site is completed, and only once you're 100% happy with the site, just before putting it live, we then ask for the outstanding balance....

Sounds pretty fair?

Hi Alyson,

We don't give credit as such, as the website doesn't go live until we've received payment. Every draft though takes between 2 and 4 hours, depending on the number of pages we convert, and the number of sub-menus, so I'd like a quicker turnaround time for the work put in.

Thaat does sound fair Adam, thanks, and gets a commitment from the prospect before we really go to work on it! 

It's an interesting point and I'm not gonna derail the thread + my dinner is almost ready  But anytime you do work for someone before you are paid in full, you're giving credit.

In your industry, where a lot of your customers could well be small businesses and startups I, personally don't like the idea of the traditional credit scoring.  For example, a lot of my friends, and myself included have CCJ's for all sorts of reasons but we have the most disposable income as well compared to other friends who've had stable jobs for 15 years and have squeaky clean credit..., so I don't always see the value in it. Also, in your industry, the only loss really is time, rather than stock or inventory which I think is when credit scoring really becomes essential.

Alyson is there a thread about this somewhere?

In most sectors producing a draft version first is often a mistake especially if no money has been taken. What happens if you get a run of people asking for drafts without going through - you will end up being a busy fool. BTW I dont know your sector so commercial factors in it may dictate otherwise

I charge 50% up front and 50% on delivery my services and in 3 years only one person has ever objected to that.

If you want to indulge the clients need to see a draft I would charge 33% before producing the draft, another 33% when they place the order with the remaining balance to paid on completion. I doubt you would find many companies not willing to risk lose £200 should they not like your draft layout.

Thanks for your feedback Carl...very good advice as I really don't want to be a busy fool! I think I'll put a larger portfolio on my website and direct prospects there to see the different styles of work we can offer, then take a % up-front for the initial draft. This also eradicates the need for any credit scoring, as the commitment will have been made at each step.

Having a portfolio of proven work and testimonials helps overcomes a lot of objections to paying deposits

30% discount just for paying promptly?!  That's massive!!

I'd suggest 5% would be more common.

30% to my mind suggests that most clients really take the @~$% with you over payment terms, suggesting you might be a bit of a walkover.  Again to me personally it would come across a little desperate "I need cash to buy food for next week".

Have you looked at the possibilty of a recurring revenue model?