This post is a lesson from my book “Collaboration Economy” which you can get for free here.
We live in a society where we want to get everything immediately and we are looking for the ultimate in convenience. This isn’t just an American thing, although we are likely the leaders of the pack. Everywhere you go, people are looking for a fast solution and a convenient way to do anything and everything.
We are on the go, in a rush, waiting impatiently.
The PayPal phenomenon in frictionless transactions
We think of it as the PayPal phenomenon. By helping small business owners that couldn’t otherwise get a merchant account to accept credit cards, PayPal has created what we call frictionless transactions.
A frictionless transaction is essentially the ability to make your product or your service so easy to purchase that the consumer doesn’t even have to pull out their wallet to give you their money or their credit card.
It’s all about convenience, convenience, convenience.
Consider any step that a customer has to take to purchase from you. The company that has probably mastered this the best and the earliest was Amazon.com with its 1-click purchase process. Do you remember the first time you went to buy a book or something else through Amazon and saw the “1-click to purchase” icon? The company instantly responds, “Congratulations, you’ve purchased the book. It will be sent to your home address.” Once your address and payment information are set up, Amazon keeps all of that information readily available so whenever you want to buy something, you don’t have to locate your credit card, enter the information and wait. It’s a great frictionless transaction.
If you are asking, “How can I become as efficient at selling my product or service as Amazon.com?” then you are definitely headed in the right direction.
Always ask yourself if there is a way to simplify, expedite and streamline the process.
An apple a day makes money
Here’s another example of how frictionless transactions make buying attractive: Apple founder Steve Jobs had this crazy notion that if he could make buying music simple, easy and affordable that people, by and large, would be willing to pay for something which many were already getting for free, through Napster and all of the other downloading piracy software programs. He created iTunes. iTunes is a perfect example of how you can buy things with a completely frictionless transaction. Created in 2003, by February 2013, the iTunes store had sold more than 25 billion songs worldwide.
The same goes with apps: I’m looking on my iPhone; I see an app I want to buy; I click to buy it. Apple already has all of my payments information stored and the deal is done. If you question the power of frictionless transaction, at the time of this printing Apple Inc. has the largest collection of credit cards in the world.
The more convenient something is, the easier it is to buy. Likewise, if you can avoid reminding someone about what it costs by storing their payment information, you make the buying experience that much more enjoyable.
Less friction, more convenience
As the power and convenience of frictionless transactions continue to grow over the next few years, credit cards will become virtually unnecessary. Cash will become a thing of the past because we will be able to purchase everything through retina scans, fingerprints and personal pin codes.
It’s happening already. When you walk into your local Starbucks, you don’t need to have any cash or credit cards on you. You simply pull out your smart phone (which immediately recognizes that you’re in Starbucks), select Passbook option, and all of a sudden your bar code reader is there and you can buy your coffee without ever having to deal with any currency. Your morning half-caff skinny latte tastes better than ever.
Another thing that is fascinating and proof positive that this is the way of the future is the fact that, at the time of the writing of this book, iTunes and Amazon account for nearly half of every single transaction that takes place on the internet, thanks to their convenient user interface which provides tremendous ease of use. Early adopters of frictionless transactions have made a lot of money and won over millions of fans.
Frictionless transactions and your business
As you develop your empire, as your grow your tribe, as you go from thinking about entrepreneurship to driving a successful and happy business, you need to continually ask yourself, “Where are my customers?” Your customers are using iTunes and Amazon and, in some cases and to a lesser degree, e-Bay. When and if possible, your product or services should be sold through these reliable institutions on the web. Your customers will appreciate the convenience and you will appreciate the incremental business.
The whole notion of small businesses even having to have merchant accounts is quickly becoming obsolete, or at least far less important:
- By aligning yourself with companies like Amazon.com, iTunes and so many others, you will be able to run your business and take transactions.
- While it will likely cost slightly more than if you had your own merchant account, the exposure you will get and the selling power that you will have will far outweigh the additional commissions that you have pay these companies.
- If you are designing your own website and setting up your own company, how can you create frictionless transactions just like these successful businesses? If, for example, you are a restaurant and you have a repeat customer, technology is such today that there is no reason whatsoever that you should ever need to ask them for their credit card when they return a second, a third, a fourth and a fifth time. In fact, if you could do this with your restaurant, the likelihood of repeat business would increase due to the ease and the simplicity that you have created in the buying process. If you run a small garage doing repairs, the moment a customer comes back a second time – and if they’ve already provided you payment – there is no reason why you should have to ask them for payment details a second time. The notion of having to ask the customer for their payment information more than once is a business model pointing you toward the past.
- Taking repeat payments is inconvenient for your business. There are other secondary aspects of this that need to be considered as well. Every time you have to ask your customer for payment information, they recognize that money is leaving their bank, their account, their wallet, their purse. But if you can, at least at a subconscious level, eliminate the financial implications of the transaction to where the customer can focus more on the product benefits, they are more likely to seek more products and seek more benefits. Whenever possible, eliminate any need to ask for payment ongoing.
- Successful, smart small business owners today are focusing on how they can get their products or services into companies which have already established and created the best frictionless transactions. Create opportunities for ongoing payments and frictionless transactions and you will realize success with sales, time savings and convenience.
Topher regularly puts together a variety of events where his team identifies KPIs, or Key Persons of Influence. Every KPI at an event receives a QR code, which is located on the back of their nametag at the seminar. These key influencers are also asked if they would like to upgrade to a silver or gold ticket. If they are interested, all we have to do is scan their QR code and the payment is made and the upgrade is complete – it’s that simple and that effective.
Likewise, when these attendees take a look at various vendors’ products and services, if they see something they want to purchase, rather than having to buy things with their credit card, they simply have to show their name tag, have their QR code scanned and we instantly take their payment – no need for a credit card or cash. Receipts are automatically emailed to them and they walk out with their product, which involves zero friction.
The cruise ship industry also does a terrific job of this – they have absolutely mastered frictionless transactions. If you have not been a cruise recently, here is a quick snapshot of how it works. All passengers have a credit card on file and they will check that credit card to make sure that it can handle what it is that they want you to do on any side trips and what the cruise line wants you to enjoy throughout your voyage. In exchange, the cruise ship will give you what is called a “cruise and carry card” to serve two purposes:
- It is your identification while you are on the ship for safety, for calls or immigration, and as you go in and out of the places that you visit while on your cruise.
- It also allows you to charge your extra cocktails. It allows you to buy things in the gift shop. It allows you to upgrade to different services. You can use it to pay for short excursions if you haven’t paid for them in advance. Essentially, it allows you to enjoy—and spend—more.
The real benefit here is that once you’re on the ship, at some level, you dissociate your actions with paying more money. You wouldn’t think it would happen after being on multiple cruises over a period of years, but, in fact, it does happen to everyone at least to some degree. The result is that if a person purchases a cruise with a value of $1,000, it is very likely that they will double that amount in incidentals throughout the time they are on the ship and the cruise ship industry knows this for certain.
As an example, when Carnival Cruise, one of the preeminent cruise lines in the world, was first getting started, they did not have a lot of money for advertising, but they would trade the ads in major metropolitan newspapers in exchange for allowing newspaper executives to come on the ship for free. It worked out well for everyone. Carnival got free advertising and it allowed them to grow their business. The executives got on the ship with their families at no cost. Carnival knew something above and beyond this: They knew that these executives and their family members, once on the ship, would have their cruise and carry card and that they would not factor in the whole amount until the end of the cruise when the bill arrived and by that time, it’s too late.
Frictionless transactions will drive customers and drive business: How can you reduce friction to zero within your small business?
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