Margins Make Money

This concept is the result of a 3-week validation sprint by an IDEO team with collaboration from ideas42, a non-profit firm that uses behavioral science insights to address complex social problems. For more information about the context and background of this work, read this blog post.  

Why BGS is Excited About This Concept

• As more products and services move to subscription models, companies are seeking ways to improve their margins on recurring transactions.
• Targeting these moments when customers are saving money on transaction fees — and merchants stand to save as well — could be ripe for giving.

The Opportunity

The following is a representative user scenario based upon our IDEO team’s interviews with real people: 

Between utilities and various subscription-based apps, Nico has nearly a dozen recurring monthly payments. Some of those services occasionally invite him to switch his payment method from one-time credit card payments to automatic electronic bank transfer, but he’s never seen the point of making this switch. One day, however, he’s told that if he makes this switch, he’ll receive $1 dollar off his monthly rate and unlock the ability to donate another $1 dollar to a nonprofit of his choice every month.

There are definitely ways to make certain transactions cheaper [for businesses] … those could be moments when more money is going to a charitable cause.

Payment Processing Expert

The Concept

Partner with a provider along the financial value chain of a particular transaction, looking for behaviors particular parties are attempting to incentivize in order to improve margins. For example, a subscription service might want its customers to pay directly from a bank account. Any margin-minded behavior like this becomes the impetus to offer a customer the chance to make a one-time or recurring donation without paying anything additional themselves.

Potential Challenges

• Requires more research into trends and opportunities ripe for an offer like this
• Adding nonprofits into the equation inserts a third party into an otherwise direct payment flow
• Customers may be reluctant to change their method of payment or behavior without a more direct benefit coming to them

What Do You Think?

Are you working on something similar? Have feedback to give us or insights that we should know about related to this exploratory concept? We’d love to hear from you! Please write us a note at [email protected]