The service industry has distinct advantages that traditional eCommerce only partially caters to. So, why settle for an eCommerce tool that’s ill-suited for services?
The service industry holds the most significant economic footprint in the US market. Traditionally, services have had limited online presence, apart from software services, due to the inherent importance of human interaction in the product. However, the COVID-19 pandemic triggered a significant digital transformation in the service industry. It led to a complete embrace of online offerings, including digital onboarding and recruitment, enabling companies to expand their customer base exponentially.
As service-based businesses strive to find ideal solutions for taking their offerings online and achieving maximum scalability, they often come across applications primarily designed for traditional eCommerce rather than tailored to their specific needs. Despite the inherent incompatibilities, they might attempt to adapt these applications, but in doing so, they risk losing their competitive edge. Service-based businesses possess unique characteristics that, with the right tools, enable them to operate differently from providers of physical products.
Critical evaluations have revealed that service-based businesses implementing software solutions built specifically for their industry experience average revenue growth of 30%. This growth can be attributed to the unique payment options, particularly payment installments, offered by these specialized software solutions, which are not available in traditional eCommerce.
Who is Part of the Service Industry?
Many businesses offering services may wait to identify as part of the service industry. Is a children’s camp a service? Is a conference a service? Is being a member of an online paid community a service? Is the software in the cloud a service? The answer to all these questions is yes, even though the nature of the offerings varies significantly. Service provides an experience that is inherently connected to time and space. Consequently, unlike physical products, a service exists within a specific timeframe and occurs in a defined area, whether a classroom, the cloud, or any other environment.
Unique Needs of Services
Since services are connected to time and space, selling them requires very different tools than selling physical products.
- Time. Service-based products need to be able to be sold for a set time. This could be a recurring membership, subscription, or class. All traded services involve time parameters in the transaction. The simplest way to think of it is that a service has starting and end times. This means that selling service offerings effectively necessitates incorporating time conflict management into the process.
- Space. Since services are linked to physical or digital spaces, quota management is often required. With the expectation of digital services, most services cannot simply be replicated like physical products. There is a set space in a classroom, a conference, or a tour. It is not possible to add another unit when the space is total. It requires setting up an additional infrastructure requiring a minimum and maximum number of sales. This limitation of space and time creates a unique structure that demands ordering the service ahead of time, creating unique financial opportunities.
- Onboarding. Using a service demands an onboarding process. This might include but is not limited to selecting your services, giving personal information, adding participants, e-signing agreements, paying for a single person or multiple people, and then receiving the service from the provider.
All of the above are things that do not exist in the non-service markets. Therefore the applications built for eCommerce need to be improved when trying to adapt them to the service market. They have optional tools and modules, such as shipping, and need others that are essential. Most importantly, they do not utilize the unique traits of the service market and therefore do not offer financial and technological tools that will give them an advantage.
Buy Now Pay Later Becomes Installment Payments
An excellent example of how the unique structure of the service market is underutilized when using eCommerce tools is the “Buy Now Pay Later” (BNPL) option offered by platforms like Shopify. BNPL allows users to microfinance purchases by basically applying for a loan, then paying the ‘loan’ in monthly installments while the business gets the payment upfront. Micro loaning is required since once the physical product is in the consumer’s hands, it is hard to ensure they will continue paying. Moreso, if they do not continue paying, there is no way to prevent them from enjoying the product. Hence the structure of BNPL is akin to a loan.
Since services are uniquely connected to time and space, they’re usually ordered in advance since a set supply is connected to minimum and maximum orders. These somewhat limiting traits give service providers a significant advantage regarding payments. Services bought in advance can offer installment payments that are not a loan but rather an auto-bill mechanism that splits the cost across time. By the time the service starts, the payments are complete, and there is no need to assess risk or credit. The service is not given if the client does not complete the payments. Even if the payments bleed into the time that the service is provided if planned correctly by the payment tool, a lack of payment will result in the termination of service. This unique online sales benefit applies specifically to the service industry.
Increase Your Revenue by 30% By Implementing Advanced Billing Methods.
With the rapid advancement of billing and payment technologies, customers now expect a seamless checkout process that offers various options for easy payments. When setting up or upgrading billing software, businesses need to choose a tool that meets customers’ needs and boosts their bottom line.
The customer’s purchasing decision involves evaluating the product, selecting options, and assessing whether they can afford the total cost. New advancements in payment processing software can help streamline the final step and ensure it doesn’t jeopardize the transaction.
Some features that service-based companies should explore to increase revenue include auto-bill installment payments and a customized onboarding experience. These features allow businesses to tailor their checkout options, enabling customers to find the payment solution that best suits their needs while accommodating the unique requirements of service-based companies. For instance, Regpack, an automated billing platform that facilitates onboarding, has found that organizations using the software experienced an average revenue increase of 30% and a 35% reduction in account receivables by utilizing their advanced billing features explicitly designed for the service industry. Let’s delve into how these features leverage the ties between service offerings and time/space while providing added value for customers.
Auto-Billing Installment Plans
Automatic billing enables businesses to offer customers flexible installment plans without requiring manual setup. This flexibility allows users to adapt to unique economic challenges. Companies that implement automatic billing experience immediate improvements in cash flow. For instance, the Japan-Seattle Suzuki Institute recently integrated automatic billing into their payment options and witnessed a 14% increase in revenue since implementation, while Sounds True, a long-time user of auto-billing, achieved revenue growth of over 50%.
Another advantage of automatic billing is the time saved internally by service-based businesses, as it frees up their billing departments to focus on more critical tasks. Regpack’s clients save an average of 60 hours per month with automated billing because the system automatically charges future payments using the payment method on file, similar to subscription models.
The key to successful installment payments is establishing a fund collection schedule that provides clients with flexibility while ensuring reliable cash flow. Additionally, installment payments offer businesses the capital necessary to expand their “space” when needed. They also help predict when classes, events, or services are filling up and require additional space. Advanced installment plan systems include calculating pro-rated products and ensuring accurate client billing.
The Bottom Line?
You can find a solution that leverages the unique aspects of service-based businesses. Tools built for traditional eCommerce erode the competitive advantage of services, while solutions customized for the unique traits of a service-based business can increase revenue. Smart billing and onboarding tools enhance the sales of services while providing analytics and insights that inform business strategies.
Frequently Asked Questions
What are some characteristics that set service-based businesses apart from providers of physical products?
Service-based businesses involve experiences linked to time and space, unlike physical products. They also require an onboarding process. Hence, selling services necessitates tools that handle time conflict management, quota management, and customer onboarding, unlike selling physical products.
How can software solutions tailored to the service industry benefit service-based businesses?
Software solutions tailored to the service industry can help these businesses manage their unique aspects, such as time conflict and quota management, and customer onboarding. They can also offer unique payment options, such as payment installments, contributing to an average revenue growth of 30%.
What is a significant drawback of using traditional eCommerce tools for service-based businesses?
Traditional eCommerce tools are primarily designed for selling physical products, not services. When adapted for service-based businesses, these tools often fail to utilize the unique traits of the service market, leading to a lack of essential financial and technological tools and potentially undermining the businesses’ competitive edge.
Why is the “Buy Now Pay Later” (BNPL) option not ideal for service-based businesses?
BNPL is a type of microfinance that allows customers to pay for products in installments while the seller gets the payment upfront. However, this option is not ideal for service-based businesses because services are usually ordered in advance and have a set supply connected to minimum and maximum orders. This unique structure allows service-based businesses to offer installment payments that are not loans but auto-bill mechanisms that split the cost across time.
How can installment payments increase revenue for service-based businesses?
Installment payments offer customers flexibility in paying for services over time, which can make services more affordable and attractive to customers. They also help service-based businesses ensure a reliable cash flow and predict when their services are filling up and require additional space.
What are the advantages of automatic billing for service-based businesses?
Automatic billing enables businesses to offer flexible installment plans without manual setup. It improves cash flow, allows businesses to adapt to economic challenges, saves time internally, and enhances predictability of business operations.
How can service-based businesses leverage the ties between their offerings and time/space?
Service-based businesses can leverage these ties by implementing advanced billing methods like auto-bill installment payments and by customizing the onboarding experience for customers. These methods allow businesses to tailor their checkout options to best suit their customers’ needs while accommodating their unique requirements.
How does a customized onboarding experience benefit service-based businesses and their customers?
A customized onboarding experience can make customers feel valued and engaged, potentially leading to improved customer loyalty and retention. For businesses, it can streamline operations, enhance customer data collection, and help in delivering personalized service.
Why is it essential for service-based businesses to implement advanced billing features?
Implementing advanced billing features can streamline the checkout process, provide customers with more payment options, and improve cash flow for the business. Some platforms, like Regpack, have reported an average revenue increase of 30% for organizations using their advanced billing features.
What is the bottom line for service-based businesses regarding their choice of software solutions?
The choice of software solutions can significantly
Author: Asaf Darash
Asaf Darash is the founder and CEO of Regpack, an online payment management platform. With extensive experience as a developer, system architect, entrepreneur, and investor, Asaf has an innate ability to build versatile products based on achievable business models, which has helped him build three successful companies to date. He holds a Ph.D. from the Hebrew University of Jerusalem specializing in the way computer languages affect human action and has served as a visiting scholar and Fulbright scholar at the University of California, Berkeley.
