How to increase your customer retention
Have you ever thought about the psychology behind customer payments?
Every time your customer makes a payment to you manually they are likely either consciously or sub-consciously evaluating whether they really need the product or service they are paying for. When they pay you cash, or log on to their internet banking to transfer money to you, they are likely thinking “this is costing me money – maybe I could go without using this service to save some money”.
In a recent article published on news.com.au it was revealed that the RBA has found that there has been a decrease in withdrawals at “foreign” ATM’s since laws were introduced requiring ATM operators to give the consumer the option to cancel their withdrawal rather than incur a foreign ATM transaction fee. (“Foreign” ATM’s are typically those ATM’s that are operated by a bank other than the cardholders bank, for example a foreign ATM for a NAB customer would be a Westpac ATM.)
This decrease in withdrawals is not price related as the price has not changed since the new laws came into effect. What has happened though is the pricing model has become more direct causing consumers to more consciously evaluate whether they really need to pay this fee or instead find an ATM operated by their bank.
How can this knowledge be applied to your business?
To keep your existing customers you of course need at least a great product or service coupled with good customer service. You also need to minimise any conscious or sub-conscious thoughts about “do I really need this” when it comes time for you to be paid.
By utilising direct debit the funds are being debited automatically from your customer’s account. This changes things psychologically as the customer is not manually making a payment to you and evaluating when they hand over the cash or make the EFT payment, whether they really need your services. You are decreasing the chances of them considering to stop using your services.
Maybe cash isn’t King after all?