Online Business

Why Your Payment Plan is Predatory

December 1, 2020

Should you charge more for payment plans? There’s a difference between flexible payment options and predatory payment plans — one offers possibility, the other is discrimination.

I'm Amie Finlayson!

I am the digital growth expert helping service providers to craft strategic offers and create courageous content that enables them to infinitely grow their online business. 

hey there!

There’s a difference between flexible payment options and predatory payment plans — one offers possibility, the other is discrimination.

In today’s episode, I’m answering the age-old online business question: Should you charge more for payment plans?

As in if your product or service is say $500? Yet someone needs to pay in three instalments, due to a variety of reasons, it could be preference, waiting on a client invoice, they don’t have the full amount… should they pay $600 instead? That’s just one example.

But the short answer, you can turn the episode off now, is no.

The long answer is also no. But here’s why.

Now this may be as I mentioned, a bit of a bold call. And you may listen to this episode in full and say no, sorry, Amie, I’m still gonna stick with this and charge people on a payment plan more.

The aim: to myth bust that that you need to charge more for your payment plan and shine a light on why this is accepted in the industry in the online business industry as the standard and why it needs to go.

Payment plans can sometimes lure in buyer’s that aren’t the right fit, that are buying on impulse, and may just be some of your most difficult customers. Not to say everyone is, or that you shouldn’t offer a payment plan — but if you’re able to cast a wide net with a “get started from…” offer that is EXTREMELY low, you may just attract the wrong crowd. As mentioned in the FOMO Marketing episode.

And I talk about this a lot. In my own programs. Pricing is a tool for positioning.

If your offer for people that you want to invest time into your course, and you want them to actually show up for the live calls. If there is a live service component, it may not be fitting to offer them a lower priced payment plan. You may get a much higher drop off and your course won’t be seen as high value. And I’m going to talk more about that in the next episode, which is all about online course completion rates.


Should Your Payment Plan Be More Expensive Than The Pay In Full Option?

So the option that is always available in payment plans, is if you do need a payment plan, it’s more expensive for you than the full price. And I mean, that’s a that’s just a red flag right there to think about it this way, you’re selling the exact same thing to someone, but one person has to pay more because they can’t afford the pay in full price.

How is that ethical? Really, if you’re selling the same product, same service at different prices; you’re not valuing your own offering, firstly, and you’re potentially breaking the trust with the customer or the client.

It is technically legal to do this. But is it fair? I’m going to say no.

And a lot of reasons why people actually do this and prefer for people to pay more is because they want to reward people that make that investment upfront because it’s better for you to get that money instantly. But it’s just an exchange of money. It’s really not a competition. I don’t know whether you should be giving someone a big pat on the back for being able to make this investment in full and then leaving behind people that can’t make the payment or need to make the payment in instalments.


Examples of Predatory Payment Plans:

So I’m gonna start with not a person, kind of a person, but an online course provider, which is called Podia. I don’t use Podia. I use Kajabi [affiliate link], just to be transparent. I was doing a little background research for this episode. And I was reading a blog post on their website about and it was their their own promotion, really, it was a blog post about payment plans, but it was a promotion of their own payment plan feature.And they were showing an example of a course called Instagram Ivy League.

It is an example of what a payment plan can look like that is just straight up predatory and the language that I went on to their sales page, it is just an example for what not to do if you care about how you want your audience to feel.

So the cost of the program is $597. That is obviously charm pricing made to $600 made to look not as expensive, that’s not necessarily a right or wrong way to do things. But there’s a there’s a payment plan of five payments of $140. Ah, and I’m pretty sure it’s monthly, but 5x 140 (pulled out my calculator here), it is $700.

Over $100 more, or a 15% tax for not being able to afford the pay in full price, you have to pay 15% more.

And I’m going to talk a little bit more about the way that it’s not that people who choose payment plans are bad with numbers. I don’t want you to think that I think that.

Payment plans created to make us feel that there’s no more attractive lower price. And really, when you actually go and add it up, it is more expensive. And the reason which I’ll talk about a bit later is a lot of entrepreneurs want to blame this on lapse payments, but really, it’s just straight up them charging more for something because they can.

The language that is used on this particular sales page, there’s a big heading that said, I made $250,000 last year with Instagram, and I can show you how to do it too. Can you can you really show people how to make $250,000 like you did?

There are so many factors, go back to the FOMO episode, if you haven’t around why that statement couldn’t be further from the truth. Even if your program is amazing. I don’t know how big that course is to be fair. But if we think about some of the bigger courses if we think about and I know if you’re listening to this, you may have invested in these programs, no problem. It’s just something to look at in your own marketing. And when you buy things going forward.

But Amy Portefield’s Digital Course Academy, it is $1,997. Or you can choose the payment plan of six payments of $387. That adds up to $2,322. So you’re paying an extra $325, which is almost an extra payment. Why?

Like why are you paying 15% more and you’re paying an extra payment. If it was really about lapsed payments, then it wouldn’t be across six months, and you wouldn’t be adding in another payment for someone. It is I think that’s completely unfair, and it’s going to appeal to a lot of Amy’s audience who are unknowingly going to pay an extra $325 for the same program.

And then if Jenna Kutcher is going to get mentioned on this podcast, obviously. But she has a smaller program, which is called The Instagram Lab. I just quickly did a little look on her website, but it is $297. And now her payment plans make absolutely no sense. But if you choose the longer one, it’s actually cheaper, which is weird, but okay.

She has one payment plan that is 4 payments of $89, which is $356. And to refresh it is $297 if you pay in full, so it’s around 16 to 17% more for you to invest in this program if you can’t afford it upfront. And then weirdly that 12 month payment plan is 12 payments of $27 which is $324 which is 8% more. So not sure how that works out, but you are still paying a little bit more to do that payment plan.

And then if we go to Stu Mclaren’s TRIBE; his course is the same amount as Amy Portefield’s. It is $1997 and he offers six payments of $399 which is even more expensive than the Digital Course Academy and you end up paying $2,394 so an extra payment 16 to 17% more around that.

There is an option to kind of invest in or take out a PayPal credit, which alarm bells are ringing. It’s promoting credit, promoting credit cards, in saying that it’s interest free if you get this. But there are many factors that go into getting credit that aren’t discussed here, that shouldn’t be promoted by online course creators or educators that people blindly trust.

So on top of this, on top of these people that I’m talking about, who use these predatory payment plans, and have large audiences, they kind of go into a bit of affiliate marketing, which I’m all for when it’s genuine, but they are kind of just selling each other’s programs.

It’s other celebrity entrepreneurs getting rich off of each other’s courses that they haven’t necessarily used or completed or got any of their success from, but they happy to sell it to their audience, because they will get a lovely affiliate payment or kind of get a bit of income rolling in.

But as a buyer, how does that make you feel, from what I’ve just talked about, what option would you rather choose? And if you don’t have the money, are you going to add that extra percentage? Are you going to invest in someone’s program and just accept that you have to pay more because you need to split the payments? I would say not.


How to Assess if You Have A Lapsed Payment Issue or Not

If we talk about the lapsed payments as that main excuse that people use, it’s really just adding more dollars into the pockets of other people. And you can dispute this any way you want.

But with a lot of small value memberships, you will say a lot of payment plans lapse, and it is really frustrating, of course. But to kind of get into this, you need to be doing an audit of your current lapse payments.

What are the terms where to people drop off?

Do you have measures in place to make sure this doesn’t happen as frequently?

Or do you not have lapsed payments? And/or not as frequently? Do you kind of just charge people more money because you can? Do you charge more money to keep yourself safe?

This is something that you need to consider and how you make your audience feel when they are on your sales page.

And then secondly, this buffer, it just really punishes your audience and it isn’t needed. It punishes people who can’t invest the full amount and it’s not going to be a lapsed payment issue, especially if you don’t have a massive audience. Or even if you do have a massive audience, you probably don’t need to add an extra payment to people, it’s more likely a business planning issue.


How to Provide Ethical Payment Plans

So what should you do instead? Payment plans are good. They offer you monthly recurring revenue, they are flexible, and they also allow more people to access you when they are given split payments; but they should be split payments.

So your payment plan shouldn’t be two things, to be ethical, of course:

  1. You should firstly obviously I hope this is obvious not make the payment plan more expensive than then the pay in full price. I really don’t think there is any excuse to do this. Why should you break the trust of your audience and penalise people who can’t pay in full
  2. Don’t run a payment plan longer than three to six months, this will get around the lapse payments. Hopefully if that is a problem that you say that is recurring and you also won’t be so reliant on a customer that is potentially the wrong fit.

So this all leads me to the end of this episode. Not everyone is the right fit for your programs or courses. And pricing shouldn’t be the main decider if you’re able to scrape the barrel through your predatory payment plans, and then get upset when you have lapsed payments. Well, I just can’t can’t help you that but what I can help you with is this:

  • Pricing is a positioning tool. Use it accordingly to attract the audience you wish to serve.
  • Review your current payment plans right now or put it in the diary for this week. And ask yourself if it’s necessary to charge 15-30% more for people who don’t choose the pay in full option.
  • Lapsed payments, a common occurrence in your business, even with your predatory payment plan. Maybe it’s deeper than charging the customer more. Really look into this if it is an issue in your business.
  • And lastly, what do you value more: your bottom line or the trust of your audience?

I would love to know if you found this episode helpful. Please send me a DM on Instagram (@amiefinlayson) and tell me how you’re finding the podcast so far.

And if you’re going to get rid of that payment plan that is somewhat predatory, let me know. I want to cheer you on shout you out. You’re the real MVP, nothing like making a change. Once you know something isn’t bright. I’m doing it all the time, even when it feels like I’m contradictory.

© amie finlayson 2020  |  All rights reserved. | Privacy Policy | Terms & Conditions

say hey >

Free checklist >

member hub >