Lately, I’ve been buying a lot of high ticket items. Prices that only a year ago I would’ve thought myself crazy to buy. As someone who’s having to start over in my business. This is a lot of upfront investment and they aren’t even stuff that will immediately generate any money – they are information products that while very valuable to me, still require me to dig deeper into my pockets to apply the techniques learnt.

Well… I’ve been thinking about micropayments for a while now. The one that sticks most to my head is Centipaid – in fact PayPal can almost be considered as a micropayment system. But what is micropayments? It’s a method that allows sellers to collect payments in small amounts. If you don’t see the need for it now – you’ll have to whip out your calculator the next time you take a small payment. But if you do, you know credit card processors take too much of a cut from a transaction. The smaller the amount the less money actually ends up in your bank. Even PayPal can hurt big time – e.g. if you charging 99 ¢ for a download you’re only taking home something like 67¢ at the best rate in other words you paid them about 32%. Pretty steep.

But why take small payments? Especially when you’re selling really high ticket information products or memberships? Good question. I’m not a marketing guru but I do have a questioning mind. What if – you’re selling a membership that’s $99 per month. So that makes the daily value $3.30. That is a lot more affordable that $99. You know – for some people in the world $99 is equivalent to a month’s salary or more. Before you start thinking about people in poor countries think again they are everywhere. But the question is not about under privileged people. My family is far from poor but we watch our budget – carefully. That makes us part of 90% of the world population. Are we ignoring these people? Some info marketers will not hesitate to say “Absolutely” but hear me out ok.

Just because someone cannot afford or won’t pay $99 a month doesn’t always mean they aren’t in our market. It means they’re cautious or have other things to invest their money into at the moment. I can’t help but feel infomation marketers are missing out a big potential market here. The gurus are probably laughing at me for saying that but I truly believe it. If we make the product more affordable without actually undermining the actual price, can we make more money? I don’t know. I don’t have a product with which I can test out my theory but I do know it holds water. A year ago I wrote “Don’t Supersize, Micro Size It” the angle was a bit different there but it shows companies are making more money by micro sizing their products. How? First, when someone takes a small sampling of the product at a price point they are comfortable with or can afford, chances are they won’t stop there especially if they liked the product. They’ll either upgrade to the full product or continue buying in small chunks. Second, taking the example of the $99/month membership, what if you charged $5/day. Technically that’s a better profit margin than the monthly price but if – this is where micropayments come in. Only if the cost is not prohibitive to process these small amounts. Come to think of it Word Tracker practices this well.

Of course, micropayments is not right for every product. Here’s some examples what should work – Memberships, video information products – either charge for small video downloads or daily access and audio products – especially podcasting – this would be excellent. But don’t listen to me

• According to an article in Internet Week, “The potential is staggering: In the United States alone, some 400 billion transactions of $5 or less are made each year, totaling $1.3 trillion.”
• “Demand for so-called micropayment systems is growing quickly. Some 14 million Americans made digital-content purchases of $2 or less in 2004, up from 10 million in 2003” – Market-research firm Ipsos-Insight.
• “Visa estimates that online micropayments totaled $3 billion in 2004, about half of it for music”, says Billy Knupp, VP of product innovation at Visa USA

For more on that, visit Internet Week > > Big Bucks In Micropayments .