The Prepayment Effect

Understand Your Buyer > How To ConvertThe Prepayment Effect

What is it?

The PrePayment Effect incentivise buyers to spend more up front and then run down their credit, incentivising them in the process.

Why does it work?

It works because by offering a discount, as a buyer you are getting a better deal as your money is going further and for the seller you are securing more cashflow and more spend.

How can you use it?

Depending on your offering, if you sell blocks of time or units of stock, you could consider selling them in a prepayment plan. What discount or incentive could you give to help your buyer prepay rather than pay as they use?



6 different ways to structure payment for your offering:

  1. Pay now start later-Allow buyers to secure something but not take delivery or use it until later when they are ready.
  2. Pay on results  -Take payment when you have delivered the desired result for your buyer
  3. Pay as you go – Allow buyers to pay as they consume your offering.
  4. Prepayment  Allow buyers to create a credit balance that they can then draw down.
  5. Buy now pay later – Allow buyers to “buy|” today but not actually pay for the item until later in the future.
  6. Finance – offer finance and instalment payments to ease cashflow for your buyer.


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