Customer retention – the power of payments

A guest blog by Don Hollingum from Direct Debit 101 – visit:


Retaining customers is an issue facing all businesses whether the products and / or services they offer are ‘essential’ or may be considered ‘discretionary’, i.e., in the case of the latter, are considered optional or are voluntary and paid for out of the customers ‘surplus’ resources.

Of course, excellent service and value for money are key ingredients in any customer retention strategy, and most businesses will concede that it is easier to retain an existing customer than onboard a new one, so lets look at some of elements that may assist in customer retention.

Retaining customers

In penning this article we are assuming that each business knows and understands its products and services far better than we ever will, and that the business also knows its USP and has a sound marketing strategy so we are focussing on other aspects here.

  • Choice of payment options – customers (clients) can be fickle and will have their own views about how they want to pay for the goods and / or services they are buying. To cater for they ‘needs’ of the customer, it is perhaps wise to offer the widest possible range of payment options – Direct Debit, Standing Order, On-line payment, Debit Card, Credit Card, to name but a few, the lists of options seems to be ever increasing. At the time of renewal it would be worth re-affirming that the currently used payment method remains the method of choice, i.e., the business is responding to the customers needs
  • Choice of payment periodicity – whilst your business may prefer or require full payment at the outset of a given contract, offering the customer the opportunity to pay in instalments may prove attractive, particularly if there is no or only a nominal increased cost for doing so. Of course there is an additional administrative cost for the business in ensuring instalment payments are received during the life of the contract, and we will look at payment types in a little more detail later in this article. Offering flexibility at the outset of a contract may very well be desirable from a customer perspective but providing this option at renewal of the contract, or when a future payment becomes due may incentivise a customer not to move their business elsewhere, i.e., the business is meeting the preferences of its customer.
  • Choice of payment dates – whether the business requires a single upfront payment or offers an instalment option, do you enable the customer to select their preferred payment date? Whilst it may be easier for the business from an administrative perspective to monitor payments on a given date, customers may not all have funds available on a business specified date and flexibility by the business may be attractive. As mentioned above, this approach could be considered at the outset and/or when a future payment becomes due. Engaging with the customer in this regard helps build the relationship and may indicate to the customer that the business is thinking of its customers best interests. Choice of payment dates is something that should also be considered in the event that the customer fails to make a payment when it falls due.
  • Having a payment authority in place – customers may want to effect adhoc payments, for example, additional purchases. Similarly, in the case of voluntary payments such as charity donations, perhaps at a time either when the customer/ donor has ‘surplus’ funds available or wants to respond positively and quickly to a specific appeal. If the business, or the charity, has a payment authority already in place it may prove easier to obtain a funds, or a donation in the case of the charity, i.e., if the customer has little or nothing to do to enable the payment to be made.

Payment methods

This article does nor seek to consider in any depth the benefits or otherwise of the different payment types that are available but there are some things that are worthy of mention.

  • Customer initiated payments – where a customer is required to initiate a payment there are a few things to bear in mind: 
    • Will the customer actually remember to initiate the payment?
    • Will the customer initiate the payment on or immediately before the due date?
    • Will the reference quoted by the customer be correct, enabling the customers payment to be applied correctly to their contract/account with the business? A failure in this regard will be a headache for the business and may result in the customer being (incorrectly)  ‘chased’ for non-payment, leading to charges, complaints, etc.
    • What happens if the amount payable changes, i.e., will the customer correctly amend the payment amount?
    • The business will also need to maintain administrative procedures to address each of the above scenario’s and more besides
  • Business initiated payment collections – using or at least offering Direct Debit as a payment mechanism would address all of the matters and more referenced in this article. Most customers would prefer to pay by Direct Debit particularly if the business is flexible in its approach to using the payment mechanism. If the business is able to collect payments from its customers and all the customer has to do is fund their account on / ahead of the due date then this may a) be a way of encouraging a customer to continue to contract with the business, i.e., not having to find a new supplier, set up fresh payment instructions etc., and b) in the case of additional and / or voluntary payments, enable the customer (or donor in the case of a charity) subject to their agreement of course, effect a regular, adhoc, or occasional payment with minimal effort on the customer’s part.

Direct Debit, your flexible friend

As has been highlighted in previous articles Direct Debit, the product, has been working for thousands of businesses, both large and small for over 50 years, and its usage continues to grow both in terms of the number of organisations that use it and the number of payments collected – in excess of 4.5 billion payments were collected in 2019.

From a consumer / payer perspective Direct Debit works very effectively as a way of paying both regular and irregular bills, and works in a similar way regardless of which businesses are offering the payment method.

In conclusion

This article covers some of the ways in which the payment mechanism(s) offered by a business can encourage a customer to do business with a particular business, or charity, and how the payment mechanism can be ‘flexed’ to help to discourage a customer from migrating to a different provider.

If your business doesn’t currently offer Direct Debit as a payment option we would encourage you to consider doing so. Remember, your business can either become a Direct Debit originator in its own right or utilise the services of an approved third party organisation to manage the collection process for you.

We would welcome the opportunity to engage with you directly on any aspects within this article, please email us at, visit us at or call us on 01245 79 1983.

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