The GoCardless guide to: Optimising your payment mix with customer incentives
Last editedApr 20235 min read
What are incentives, and how can they increase the proportion of your customers paying by bank debit?
Although many customers may already be aware of the benefits of paying by bank debit (often referred to as Direct Debit in the UK), some of them may need a little extra encouragement to switch over from a different payment method.
In this case, you can look to offer incentives to your customers to encourage them to switch, so that you can make the most of the benefits of collecting payments by bank debit
What are the types of incentives I could offer to my customers?
Generally, there are two types of incentives you can offer to customers:
Direct incentives
Direct incentives are any incentives that offer material or financial benefit to the individual. Examples of direct incentives can include:Â
A price discount on your product or cashback
Free upgrades to your customers’ package or service
Service discounts (e.g. 1 month free)
A free gift
Gift vouchers
Offering a payment plan or flexible payment option, e.g. splitting payments over 12 months rather than collecting the amount in one go
Direct incentives are great for B2C businesses because they can provide a powerful reason for customers to take action. They can also be the best option for attracting customers who already receive rewards from their existing payment method (e.g. credit card reward points).
Indirect incentives
Indirect incentives are any incentives that, although may not offer a direct benefit to the individual, will still encourage customers to take a certain action. Examples include:
Offering a donation to charity for switching
Option to donate a gift or gift voucher to someone else
Environmental benefit, e.g. planting a tree
Transparency regarding the reduced cost of bank debit, e.g. for charities
Indirect incentives can be better suited to B2B businesses, as the person deciding to switch may not be motivated by a direct incentive, because that person may not be the same person receiving that benefit.
Examples of popular incentives
Price discount or cashback
Type: Direct
How to implement: Offer a % discount for paying by bank debit. You could also look to waive any administration or renewal fees for customers who choose to pay by bank debit or provide cashback on completion of a successful purchase.
Examples: The British Society of Hearing Aid Audiologists offers a 13% discount for any members who choose to pay by bank debit. Birmingham Botanical Gardens offer a flat £2 discount on membership for choosing bank debit.
Product or service upgrade
Type: Direct
How to implement: Offer a free upgrade, or additional product features, to customers who choose to pay by bank debit.
Example: Some mobile phone companies will offer extra data or minutes to customers who select bank debit as their payment method.
Service or product discount
Type: Direct
How to implement: If your customers pay monthly, you could offer a free month for choosing to pay by bank debitÂ
If you’re worried about your customers signing up for a free trial and then cancelling the service after the free period ends, you could offer the free period at the end of their contract.
Example: Some landlords offer rent concessions (e.g. a month’s free rent) for tenants who choose to pay by bank debit.
Free gift
Type: Direct
How to implement: When offering a free gift, try to tie this back to your brand. Think about offering company swag, or a product that connects to your product or service.Â
For example, a coffee subscription business could offer free coffee to customers who switch to bank debit.
Example: Brighton Table Tennis Club offer a free t-shirt to any members who choose to pay by bank debit.
Gift voucher
Type: Direct
How to implement: Gift vouchers or cards allow customers to choose their own reward for switching.Â
Example: You could offer your customers a choice of voucher for a single retailer, or explore multi-retailer options.
Flexible payment option
Type: Direct
How to implement: Offer customers the option to spread their payments across a period of time (e.g. monthly) if they choose bank debit, rather than paying the full sum at once.
Examples: The Automobile Magazine and the Infection Prevention Society offer a quarterly membership option exclusively for members who choose to pay by bank debit.
Charity donation
Type: Indirect
How to implement: Offer a one-off or donation to a charity if the customer chooses to pay by bank debit.Â
Be transparent; mention to your customers that choosing to use bank debit allows you to save money and pass on this saving to charity.
Example: You could allow them to select their chosen charity from a range of options, or vote on which charity they would like your business to donate to.
Gift donation
Type: Indirect
How to implement: Offer the customer the opportunity to send a gift or voucher to someone else, e.g. a colleague, family or friend.
Examples: Organisations such as Huggg allow you to send gifts such as coffee, brownies and cinema tickets to individuals - you just need to share a link with the recipient
Environmental benefit
Type: Indirect
How to implement: Offer the customer an opportunity to offset their carbon footprint by partnering with or donating to an environmental organisation.
Example: Some organisations allow you to plant a tree on behalf of another person.
Cost transparency
Type: Indirect
How to implement: Explain to the customer that bank debit is the most cost-efficient option for your organisation, due to reducing administration.
Example: The Trussell Trust explain on their customer FAQs that regular donations made by bank debit involve less administration, which means that more money can go towards the work they do to end UK hunger.
When should I offer incentives to my customers?
There are certain events or times when it makes more sense for your customers to make a change to their payment method. You can use these events as an opportunity to reach out and offer incentives to encourage your customers to make the switch.
There are three potential event types during which you can offer incentives:
Seasonal events: relates to a particular time of the month or year
Business events: relates to a company action or initiative
Customer events: relates to any customer-led activities
Think about offering incentives to your customers which are triggered by a specific event. We’ve added some suggestions below:
The start of a new tax year
Category: Seasonal
Why it matters: Most businesses will already be looking at their finances and completing payment admin around this time, so switching payment method could be another task that fits in with their current to-do list.
The start of a new calendar year
Category: Seasonal
Why it matters: Many customers will be looking to make improvements to the way they budget or spend their time at the start of the year, so, coupled with an incentive, a switch to bank debit may be more attractive to them right now.
When your business implements a pricing change
Category: Business
Why it matters: If your business is increasing its prices, you can frame bank debit as one of the methods you’re using to try and keep costs down for the future, to reassure your customers.
Your customer’s renewal or end of contract/subscription date
Category: Customer
Why it matters: You will likely already be in touch with your customers at the time of their renewal date, so you could combine offering an incentive with the communications that they will already be receiving.
During a package or service upgrade/downgrade
Category: Customer
Why it matters: Again, you will likely be in touch with your customer already around this time, so take the opportunity to highlight the benefits of changing to a different payment method and offer an incentive for switching.
During a payment event, e.g:
Credit/debit card details expiring or about to expire
A payment fails
Invoice due date is missed
Category: Customer
Why it matters: When anything goes wrong (or could go wrong) with a payment, it’s a good opportunity to get ahead of this and offer your customers an alternative, which will help to relieve some of the payment anxiety or stress they may be feeling.
During ad-hoc service events, e.g. if the customer contacts your customer service team
Category: Customer
Why it matters: If your customer is already in touch with you to discuss an issue or query, you can advise your Customer or Sales teams to offer the incentive for switching in addition to a resolution.
Important things to note about offering incentives
Incentives shouldn’t be your first option to encourage customers to switch to bank debit. Consider running a customer campaign to target your customers who are more likely to change to a different payment method.
Whichever incentive you choose, make sure that this is meaningful to your customers. The more aligned your incentive is to your customers’ motivations and needs, the more likely they are to take you up.
Make your incentive a time-limited offer. This will encourage your customers to take action faster, allowing you to track the success of your incentive program more effectively.
Consider your budget. Make sure that you have allocated sufficient budget to cover the cost of offering incentives, and remember that your aim is to ensure that as many customers as possible take advantage of your incentive program. Moving your customers over to bank debit can improve your cash flow and administration costs, so ensure that you balance these benefits against the material cost of the incentive program.
Disclaimer
We have developed this guidance to help you understand the incentives that you can offer to your customers, to encourage them to change their payment method by paying by bank debit. If a price discount or incentive is offered, the cost savings should be transparent to the customer and this should be advised to the customer before the payment transaction.
