How to Price Recurring Payments
Last week, I shared how to easily set-up automated recurring payments in PayPal using a free PayPal business account.
As you’re setting this up, you may be wondering how to price recurring payments.
When you offer recurring payments, it’s like you’re a bank giving a loan. Because of this, the total amount of the recurring payments should be more than the full-pay price.
There are 2 reasons why you want to charge “interest” when offering recurring payments.
#1 When a client chooses to pay via recurring payments, you are taking on all of the risk. In this case, the client is receiving your product or service before they have paid in full. Occasionally you will find that clients won’t make all of their payments, so you want to build in a little protection for yourself.
#2 By keeping the full-pay price as the best deal, you are incentivizing your clients to choose this option. When people pay in full, it means more money in your pocket right now.
How to calculate recurring payments
You want the total of the recurring payments to be more than full-pay, but not so much more that you’re pushing clients away.
For recurring payments, I like to add about 10% on to the total.
Here’s an example…
If you are offering a program for $997, 10% of that is $99.
In this case, you would want the total of your recurring payments to be $997 + $99 = $1,096.
If you are offering a 3-pay option, you would divide $1,096 by three. In this example, your 3-pay option would be $365.
The 10% calculation is not a hard and fast rule. I have also seen people successfully add 20% on to the total. If you chose to add on 20%, in this example, you would be offering 3 payments of $398. Play around with adding 10-20% on and see what feels right and what works for you.
Have questions about how to price your products or services? Post your questions below so I can support you.