I’m opening up the mailbox and answering YOUR questions!
You can’t have it, even if you want it…
I don’t write about my wife’s business much. Yet for today’s article, I’ll start with a quick story from her experience in getting clients.
She’s a Psychologist, with a private practice here in Lincoln, NE.
And when she was getting started, it was sometimes hard to keep her schedule full. This is completely normal for a new practice, but that didn’t make it any easier.
The tricky part was, as available as she made those open hours for new patients, it was sometimes hard to make new clients really want them.
Repeat: when she was readily available, it was hard to get and keep clients.
Then her client load got full. And she created a wait list.
That’s when something completely counterintuitive happened.
As soon as it was impossible to get started seeing her as a client, the prospective clients came out of the woodwork.
Now, you can also attribute this to her growing reputation, and referrals — both of which have fueled her practice growth.
But as she tells it, that wait list is magical.
A client will email and say they want to see her. She tells them she has a wait list, and that even if the person got on the wait list, it may be 4 to 6 months before they can see her.
She then tries to get them to take a referral to someone else.
They refuse. They insist they’ll wait. It must be worth it. Then, they follow up from time-to-time, to try to get on her schedule quicker.
This happens way more often than you’d think.
She literally won’t take their money, but they keep trying to get to her.
Not a bad problem to have, you think?
This is the power of takeaway selling…
Using a wait list can be a form of “takeaway selling,” which I mentioned was my One Big Idea that I took away from reading No B.S. Sales Success by Dan Kennedy.
Essentially, you’re making something more interesting by making it harder to get.
Now, my wife didn’t create her wait list for this reason. She created the wait list because her client load was full and she needed to create a wait list.
But she still benefited as if she’d done it to make it easier to sell.
And I often recommend — especially for service providers — to implement some level of takeaway selling in your business.
Which brings me to today’s question.
Remember: every Monday is Mailbox Monday, where I answer your questions on marketing, selling, copywriting, business-building, and more.
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Today’s question is…
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Hi Roy,
My question is: what are your thoughts on having a refundable application fee to get access to the product?
For example, let’s say I have a trading system and there’s only 100 spots available and it’s $1,500 a year.
You, the potential client, need to fill out an application to see if you qualify. You pay $99 and if you’re rejected you get the money back.
If you’re accepted then the $99 is applied to the cost of the service or something along those lines since I entirely made up this example.
What do you think?
Best,
JB
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Let’s zoom out and look at why you’d charge an application fee…
Of course I set up the question by talking about the power of takeaway selling.
Charging an application fee (and having an application in general) is — like the wait list — another example of takeaway selling.
And in that sense, it could work.
But let’s add some nuance to why you’d want to charge this fee.
First, you may want to charge a fee if you have a really high lead flow, but a lot of those leads are unqualified. If you’re consistently dealing with refunds or a ton of qualified leads, you may want to charge the fee and implement an application process to reduce the effort and expense of dealing with that situation.
Along with that, you may charge a fee simply because you want to deal with better-qualified leads. Typically someone who will pay a fee and go through an application process is self-qualifying and self-selecting as someone who is a good lead.
Of course, you can also get that simply by putting the application in front of them, without the fee. I know of multiple businesses that start with an application and phone call, but that’s all free. They position it as an initial consultation, and treat it much the same. The difference is that money’s not going back and forth.
The difference in adding the fee to that step of the process is in getting some level of financial commitment (as well as getting payment details).
Again though, all of this will lead to trade offs. The harder you make it to get through, the more potential fall-off you could be dealing with. Sometimes it will work the opposite way, but you should start with the assumption that every layer of complication will reduce the final lead count (as a percentage of total leads).
So if you have zero leads, you probably want to figure out how to generate leads before you think about application fees.
But if you have more leads than you can handle and you’re looking for a way to pre-screen for the best, this can be a great option.
I’ll add one more important broad qualifier. If you have ANY legitimate reason to either screen up front or to simply get leads to prove they’ve got cash to spend, you may want to consider the application and fee. But again, this moves from being a selling tool to being a necessity (e.g. College admissions charge a nonrefundable application fee otherwise every high school student would apply to dozens of schools and create a paperwork nightmare.)
It’s also worth having the product versus services debate…
It’s completely normal and common in a service-based business to do some kind of application process. Because services are inherently limited by the time required to fulfill.
Products, not so much, so it makes it strange. Strange isn’t necessarily bad, and it could be good. But you’re forcing your prospect to accept an unusual situation if you’re selling a product (including software) with an application and fee.
All of that said, if you have other conditions on the product (such as the question’s example of a limited number of spots), it can create some legitimacy to the application process, and make it feel like more of the way things are done.
So, I’m less likely to jump all over it with a product than with a service.
And yet, depending on if you can pull it off with credibility and believability, I do think it can be effective for products as well.
It’s also worth thinking about how you position it…
You can call this whatever you want, and that may also impact how your prospect perceives it, and how they respond to it.
Of course, you can go with the example of an “application fee.” In which case, you want to have a nice formalized application and application process. And as someone goes through it, they should legitimately feel like they’re being screened. Even if it is a sales conversation on steroids, it should still feel like an application process.
If you’re less committed to the application process, you could ask for a “deposit.” The deposit could reserve their spot, pending a quick call to confirm that the details of the product or service would be a fit. This would serve a very similar screening function, while also giving you more flexibility in implementation.
You have lots of other options, too. Such as an “opportunity analysis consultation.” You could do this with or without a fee or deposit. The idea is to set up the expectation that you’re going to screen them as to whether or not this opportunity is a fit for them.
You may even be able to charge a separate fee for that consultation, if it leads to an action plan they could implement without any further purchases.
Here’s an alternative approach I might consider…
If I were selling the trading system above, I might actually build the application into the client onboarding process, and charge them the full price of the system up front.
This would have the same screening benefit of requiring the up-front payment.
Plus, it would eliminate a potentially-painful collections process after the application fee, to get the full product price out of them.
Then, you could actually run them through the application as part of getting started with the system, just as a final qualifier before you give them access.
This would only reinforce their interest in the product, right as they’d just spent money on it — plus it would give you the option to legitimately screen anyone who is a bad customer for your offer.
(The downside being that too many refunds can be a negative with your payment processor, and PayPal has — I think — stopped refunding their fees to merchants when the merchant initiates a refund. That could get expensive quick in a scenario like this and would be worth investigating.)
Here’s my ultimate recommendation…
I think you have the right idea with this question.
And as much as I can give you more things to think about and ideas to consider, I don’t make the ultimate decision as to whether something will work in your market.
Neither do you.
The final votes are cast by your market. And the way they cast them is with their wallets.
Put the offer out there. Test it. See if it works.
If it does, excellent!
If not, regroup, pivot, and test again.
That’s the only way to really be sure how something will work — even if it’s based on the timeless and powerful principle of takeaway selling.
If you’re nervous about testing something, you can always call it a “beta.” Which has its own appeal in itself. And creates a situation where your prospects are even more likely to be forgiving if you come back to them weeks or months later with a new version of the same offer (that is, assuming they remember, which they usually won’t).
So…
Go ahead, nail down the details and test it, and here’s hoping it creates a breakthrough!
Yours for bigger breakthroughs,
Roy Furr
