Work the payment-plan downsell ladder

1. What a payment plan is — and is not

This is not selling a cheaper thing. It is selling the same thing on different payment terms. People turn offers down when they cost too much today, not necessarily when they cost too much overall. A no does not mean you are mispriced; you might only need to change the terms. It is usually about what they have to pay right now, not what they pay in general. The mistaken response is to reach for something cheaper.

Payment plans get the most buyers to pay the highest price: less in the moment, full price or more over time. They work at any price.

They are a gamble. You make money when customers finish paying. You lose it when people cancel before you have made a profit, and when people who would have paid in full take a plan instead and then cancel early.

The rules that govern every downsell, not only this one, are set out in section 8 below.

2. The ladder in one sale

In one example, a parent turns down a term of tutoring. Half down? No. A third, in three payments? No. What would work? Nothing today, but the parent is paid on the fifteenth and could cover it all then. The parent puts nothing down, the full amount is charged on the sixteenth, and it clears. The dates in this example are invented.

3. The seven rungs

The rungs are run in sequence; a customer moves down only after saying no to the one above.

Rung 1 — Reward paying in full; never punish paying over time. If a customer pays over time and you start delivering, you carry the risk, so the plan should cost more. Businesses normally add interest, and everybody hates interest. Instead, present the full payment-plan price first, and offer the lower price as a saving for paying up front. With 10k paid in full and 12k on a plan, pitch 12. If they say yes, ask whether they would like to save some money, and they prepay 10 and are delighted. If they cannot do 12, tell them they need not pay it all today — and now the plan looks like it carries no interest on the original price. Pitching 10 and then charging 12 because they cannot afford it feels harsh; this avoids it.

The difference usually never changes a buying decision. What you usually add on top might be 10 or 20 percent, which is usually not enough to move somebody into a different buying tier — a gap of 10k against 20k would be. If everyone says yes to the plan price, you never mention prepaying and you have learned the market will bear more: the plan price doubles as a test of where to anchor, and you can keep nudging it up until people balk.

Rung 2 — Third-party financing, credit cards and layaway.

• Third-party financing. Another company pays you now; the customer owes that company. Car dealers do this constantly. Adding it is stated to increase revenue by 35 percent most times, on average. It takes work to set up and is typically worth it.

• The credit-card reframe. Ask whether they would rather you decide their payment terms or decide for themselves. Everyone says themselves; tell them to use a credit card, where they can choose any plan that works for them. If they say they want the alternative, it is your in-house plan — you pick the dates — and that is usually a much shorter term than a card allows. It is said to work especially with consumers, with no explanation offered.

• Layaway. The customer pays the product off before getting it, the way stores sold before easy credit: drop off money every Monday for four Mondays, then take it home. The customer carries the risk, not you. In the view here, from one consumer's experience, paying toward something builds anticipation, where paying for something already received breeds resentment. Where you can delay the start of a service or a delivery, having them start paying is a great way to use it, and it is as flexible as you like.

  The case: a software business selling enterprise onboarding at about $20,000. A young agency asked for a payment plan and proposed 800 bucks every other week, then asked to fly out next week. Told they could split it as many times as they liked but could only come once it was paid off, they paid half now and half in a month. Layaway lines up the incentives: the customer wants to pay fast to get the thing, where a customer already holding the value wants to stretch payment out as long as possible. You can close anyone, set any terms, and carry no risk.

Flag: how long the proposed plan was. $800 every other week against about $20,000 runs to about 50 weeks of payments. The delay is put at six months or more, with the arithmetic left unworked.

Rung 3 — Half now, half on payday. If they say no to all of rung 2, ask when they are next paid — for a business, when the next inflow of cash or large contract lands. Offer half today and the rest then. If that fails, ask the question that cuts to the core: what is the most you can put down today? Take that now and the rest on payday — a quarter now and 75 percent later might be the result. The aim is to pull cash forward into the first thirty days. Schedule off paychecks, because most people are paid every two weeks, and that beats monthly billing: three payments can land inside 30 days.

Rung 4 — Check they still want it. Sometimes people just keep saying no. Pause and check if they want it. No payment plan will satisfy a customer who does not want the thing. Ask them to rate from 1 to 10 how badly they want it.

• If they say eight or above, keep offering plans and tell them you will find something that works.
• If they say seven or below, ask why it is not a 10, then say you may have something that could fit better, and pivot to a different product — the exit ramp from payment terms to a feature downsell.

Rung 5 — Thirds. For those who said eight or above: a third now and a third on each of the next two paychecks, or on each of the next two months.

Rung 6 — Spread evenly. Spread the payments across the service, but still front-load: six months of service can be paid over three. You paid to acquire and onboard the customer; get the cash early. In one business, a 16-week program was billed weekly, 16 times: the fullest spread.

Rung 7 — A free trial. Normally the sale ends here; there is little lower to go. The trial is run in a particular way, set out on SOP 71 — Run a free trial with a penalty.

The ladder narrows with use. With very broke customers, the ladder in one business came down to prepayment, financing and the even spread, because so many refused everything along the way. Map your ladder, then tighten it over time to the stops your customers tend to say yes to.

4. The alternative: step between paying up front and paying monthly

A simpler method, offered as an alternative. Ask whether they would rather have giant monthly payments or tiny ones. They say tiny. Tell them what it normally costs, and that prepaying today gets a large discount and no monthly payments at all. That frames the plan as the worse option and prepaying as the better. If they say they cannot afford it, tell them the more they put down, the lower the monthly payment; if you can't manage it all up front, adjust the deposit until the monthly figure suits. Most people want low monthly payments, so they put more down. If they still say no, check they want it; if they do, move your chair to their side of the table and go through the options together.

Which ladder for which business. The fixed rungs — this is for bigger companies — suit a business with a finance department, which can list the plans, load them into the CRM and track them. Sometimes this alternative produces odd payment plans that a finance team might hate; it suits an owner-operated business that can agree whatever works, and a small business can probably handle it. It depends on the size of the business.

5. The upsell inside every plan

Keep the paid-in-full discount open after the sale. Say at signing that the prepayment discount will be honored for the next 30 days — especially in a business-to-business sale where you help the client make money: you might not trust us fully yet; put a third down and let's start. Then, at two weeks and again at three weeks, about a week before the offer expires, ask whether they would like to clear the balance and keep the saving. If you have done a decent job, a lot of them take it, because now they know you. The window can run up to a set period before the discount expires; the one given here is 30 days.

6. Keeping plans healthy

• Bill on paydays. Fewer declines, fewer insufficient-funds failures.
• Watch paid-in-full. Once plans are offered, the close rate should rise. If paid-in-full sales fall, customers who used to pay in full are taking plans, and you have a problem. Plans only grow the business if they bring more customers and those customers pay.
• Pay salespeople on cash collected today. It takes more selling and aligns the salesperson with the business, which wants the money today. Continued payments owe more to onboarding and delivery, so hold any excess commission for the people on the back end who keep customers paying.

7. Recurring revenue

State the annual contract as the price. At $3,000 a month, the price is $36,000; prepay the year and it is 30. If not, go straight to the monthly payments of $3,000. A recurring service might only have two step-downs rather than seven, because it lacks the natural fractions of a fixed-length program.

8. The rules for every downsell

The payment plan is the first downsell in the lineup; a trial with conditions and a cut-down product follow it. The rules below hold for all of them.

What a downsell is. It is what you do when somebody says no. You find a way to meet their budget, and there are two: change how they pay, or change what they get. How they pay means how much now against how much over time. What they get means the quality, the quantity, or something different.

Never offer the same thing for less. In one example, a couple buying a sofa is offered a stain-protection plan at $450, refuses, and sees the same plan come down in steps to $60. They keep refusing, first on cost and in the end out of distrust, then start to doubt the sofa's price as well, and leave without it. The figures in this example are invented. Drop the price on the same thing to close one sale and that customer, and everyone they tell, questions every price you quote from then on: trust traded for a buck. It also, more or less, tells them your price has no meaning. A smaller plan at a lower price would probably have kept their trust and closed the sale; cutting the same plan's price lost both.

Rule	What it means in practice
The no was to this offer	Not to every offer. Treat it as the chance to find out what they really want, and profit from it
A downsell is a trade	Work with the customer on a combination of giving and getting until you find one that fits: if you give something, get something back
Personalize, don't pressure	Find what they like and what they do not; offer more of the first and less of the second, at a price to match
Asking is not offensive	A customer who refuses a large soda could be asked if they want a small one, a juice or a coffee; not offering to help would be the offensive thing
Limit downsells to what you have	New ways to offer the same things: a hundred ways to offer what you already have, not a hundred different offers
Dropping the price is not downselling	It is discounting. Somebody who wants the thing but not the price does not get it cheaper; paying less now and more over time is the payment plan on this page

Where the downsells sit. After the payment plans come the trial with a penalty, which also changes how they pay, and the feature downsell, which changes what they get for the price. These offers raise 30-day profits further by making sales where customers would have said no. A downsell can be used at any point in a money model: up front, after somebody takes or refuses an upsell, or on the back end.

Flag: a cheaper offer after a no. SOP 228, section 9, warns against it: a qualified prospect who turns down the main offer is not sold something lesser, because reps with a fallback drop to it at the first push on price, and main-offer sales fall. SOP 72, section 7, also keeps the cheaper quantity and quality versions for prospects who do not qualify. The cost of this section's rules: that fall in main-offer sales, and buyers who would have paid for the main offer taking the cheaper one. The cost of the other two: the sales a downsell saves from a no. This page does not settle which reading is right.

9. What this page does not decide for you

• How large the payment-plan premium should be. The 10k and 12k pair is an example; this page gives no figure for the right gap.
• What to offer at rung 4 when the answer is seven or below. The feature downsell is named; its design is not established on this page.
• Whether a small business should use the section 4 alternative. Said to suit owner-operated businesses; either ladder may be chosen.

10. The checklist

Rung	What is offered
1	The plan price first; a discount for paying in full
2	Third-party financing, the credit-card reframe, layaway
3	Half now, half on payday — or the most they can put down
4	The 1-to-10 check: eight or above continues, seven or below pivots
5	Thirds, on paychecks or monthly
6	Even payments across the service, still front-loaded
7	A free trial

Question	The answer
What a payment plan changes	When they pay, never what they get
Where the cash should land	Inside the first 30 days
Billing dates	Paydays
The warning sign	Paid-in-full sales falling
Commission	On cash collected today
Recurring services	Annual price stated; there might be only two step-downs
Every downsell	Change how they pay or what they get; never the same thing for less

11. What this page does not cover

The place of downsells in the money model is SOP 59. How fast the cash from a plan must return what the customer cost is SOP 57 — Compute the payback period and shorten it. The exit ramp at rung 4, changing what the customer gets, is SOP 73 — Feature-downsell customers before they cancel, and the tiers it draws on are SOP 72. The last rung is SOP 71 — Run a free trial with a penalty. Paying for the whole year up front, as a continuity decision, is SOP 74 — Price continuity against upfront cash.

Credit checks and lending regulation are not covered on this page.