The Secret Of Inertia
I was reminded of this yesterday morning. My colleagues and I were wondering how a particular financial publication, with economic and market predictions that had gone all wrong lately, was faring in terms of renewals.
We found a dramatic decrease in renewals — from 74% to 35% –from the bulk of subscribers.
One significant group, however, showed no falloff whatsoever. This was the group that had subscribed on a bill-till-forbid basis.
The astonishing difference in response from that group virtually 100% – is going to keep that particular publication in the black this year. (Long enough, we hope, for its editor to get back on track.)
Why do bill-till-forbid renewals make such a dramatic difference?
You could argue that bill-till-forbid subscribers are more committed from the outset. Im sure they are. But how much could that count for? An educated guess: maybe 10%.
The big factor in retaining the 74% renewal rate is inertia. For the bill-till-forbid group, the trouble of cancelling their subscriptions outweighs the cost of keeping them.
Getting your customers on some kind of automatic billing program is great for business. Its great for them because it saves time and hassle. Its great for you because its easier, cheaper, and more profitable.
Automatic billing wont save truly dissatisfied customers (and it shouldnt), but it will make it easier for those on the edge to stay with you and the difference may be significant.
About 10 years ago, I created a bill-till-forbid offer for a mail-order jewelry business. When the rest of the business hit a slump, the auto-buyers kept ordering . . . in dollar amounts large enough to keep the company solvent for almost 18 months (until the market turned.).
A list-brokerage business I once had produced $40,000 a month in net profits . . . for many years . . . with virtually no maintenance . . . thanks to the introduction of a sort of automatic fulfillment-and-billing program.
A publishing business AP owns in England relies on its own unique auto-billing program to generate profits a full 5 percentage points higher than those of comparable businesses in the States that dont have the chance to do the same thing.
A lot of businesses you wouldnt normally associate with bill-till-forbid offers rely on automatic billing from national mail-order steak suppliers to toy manufacturers to legal-service companies.
Not to mention insurance companies, brokerage houses, and karate academies.
Automatic billing and the inertia it capitalizes on must be responsible for at least 10% to 20% of the profits generated by American businesses. Thats a lot of money.
And yet no one is talking about it.
Why Is It Such A Big Secret?
Clearly, automatic billing doesnt get the credit or the attention it deserves. I cant think of an article Ive ever read on the subject . . . or a speech made.
Maybe its because we are all embarrassed by it. No one wants to admit that the most profitable part of his business takes advantage of the apathy of its marginal buyers.
Another reason you dont much hear about it is that it is not at all easy to put in place . . . and maintain. New customers are justly skeptical of such purchasing arrangements, and so it takes a lot of persuading to gain their trust.
Also, automatic-billing programs require very capable management and sophisticated programming.
Whatever the reasons, dont let them stop you from putting a program like this into your business. It will be a bit of a problem starting it up, but as the years go by and your automatic income keeps rolling in, youll be very happy you took the trouble.
What Kind Of Business Can Make Automatic Billing Work?
Some businesses are more suitable for bill-till-forbid programs than others. But many more enterprises than youd first think can employ them. Let me give you a somewhat far-fetched example, to illustrate the point:
Lets say you have a dry-cleaning business. How could you get your customers to let you bill them month after month . . . automatically?
Two ideas come to mind:
1. A discounted payment program for laundering shirts or sheets for those who regularly need that service.
2. A new line of detergent and bleaching products that you put your private label on and sell to your customers for the cleaning they do at home (or some other household product they might be inclined to buy if it were displayed on your countertop).
Admittedly, these ideas are a little far out. But they could work. And if they did, youd have regular, predictable monthly income enough to pay for your rent and utilities perhaps and extra profits from the new-product sales, which could go toward a new car or built-in pool.
About 15 years ago, I bought a pair of earrings for my wife. The lady who sold them to me was unusually interested in our personal lives when we were born, when we married, etc.
Of course, she was just being clever. Today, she sends me jewelry at least four times a year (Christmas, Valentines Day, our anniversary, and my wifes birthday).
I am generally happy with her jewelry, but it is a bit pricey. I keep buying because of the convenience a reaction attributable, of course, to inertia.
Whatever your business or profession, there is surely some way you can make automatic billing work for you. You dont need to get every customer hooked on a bill-till-forbid offer, but even a small percentage of your sales, coming predictably and reliably, can make a big difference in the long-term health of your business . . . and in your own piecepeace of mind.
By the way, you can apply the principle of inertia to your private life. Ill talk about that some other time.