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I first read Steve Krug’s book “Don’t Make Me Think” about a year ago. I have never finished it. The reason is that I got to the chapter about how to do one-on-one usability testing and was so fired up about it, I couldn’t stand the thought of continuing to read until I’d at least tried to put his ideas into practice.

Since that time my two cofounders and I (we run Skritter)  have run quite a few usability tests.  My closest guess at this point is that I’ve run usability sessions with more than 50 people. We have benefited enormously from having one of us sit down face-to-face with someone who isn’t an internet addict and have them use our creation.

Over the last year we have become much better at usability testing, and I thought I would share 3 of the lessons we learned that Krug doesn’t mention in his book. The following tips were gleaned from several group and many one-on-one sessions, and I hope that prove useful as you start your own usability testing:

1) Never present a page as “redesigned” or “new.”

Krug mentions that testers are often polite. This is an understatement.

Case in point: we redesigned a page where people were stumbling on the UI. In the next batch of tests I asked users to tell me whether they liked the interface on the old page or the new one. The results were astounding: my new page was preferred 95% of the time! Wow, I’d massively improved the main vocabulary page! But wait, why was the number so high? Just for the heck of it, I started switching the pages that were “new” and “old.” Whereas before I’d give the testers variant A and then said “here’s a redesigned version,” and show them B, now I lied and did the opposite. You know what? Suddenly people loved the old page overwhelmingly.

Never underestimate the social graces of a tester, especially when you are paying them for their time (more about that later). I have tried and tried to get across to testers that I want them to criticize and be rude, but I’ve given up. If you absolutely need to test two pages against each other and you can’t use a multivariate or A/B testing framework (as was necessary in this case unfortunately), never tell a tester which version you just spent the last week building.

2) Pointedly ignore social cues for help.

At the beginning of a testing session, I always tell testers that I’m going to give them a task to complete, shut up, and watch them get stuck. I tell them I won’t offer help. If I’m really on task that day, I’ll repeat this point twice. So far, most people I’ve tested either don’t hear or don’t fully realize what I’m saying. They get stuck on our (inevitably bad) interfaces and turn to me and say: “Uhhhh …. am I doing this right? …. do I click here? ….”

In situations like this, you have to ignore any desire you have to smooth over the awkward moment by helping, and remain intentionally quiet. To help the person is to destroy the value of watching them muddle through it. In our case, I’ve learned incredible things from being quiet and letting people get by on their own. To give a few examples, I learned that people were trying to log in to the site by using the “create a new account” fields (which required them to do a double-take and re-enter their info), that the link to our press page was all but invisible, that after creating accounts only about 1/5 could figure out how to study a list, and that there is something irresistible about clicking this one out-of-the-way menu. We were able to fix a lot of things because I didn’t talk.

So halt thy tongue and let your tester’s actions do the talking.

3) People are often willing to do a usability test for a lot less than $50.

In his book, Krug mentions that he generally pays $50 for people without expertise to test web pages. When we first decided to start testing, we batted around various per-test figures. I wanted to do $30/session. My two cofounders thought I was throwing money away and that we should start low and gauge the response. Thank goodness I listened to them. We put up posters advertising $15/session for testers and we were inundated. If you choose the right demographic (we chose college students), testing can be done for much less than even Krug suggests.

We are still testing and refining our technique, and I’d be interested to hear if anyone else has tricks that help them wring more from their usability testing sessions!

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Aug 30, 2010

Location-based services, such as Foursquare and Gowalla, are proving quite popular with consumers open to sharing their location with the world. They're also built to be inherently business-friendly, as most allow retailers to incentivize checkins and social sharing behaviors in the hopes of attracting swarms of patrons to their businesses.
 
As the space continues to evolve, new platforms, technologies and services are emerging with the specific intention of helping small businesses reward their loyal patrons with deals for their in-store behaviors.
 
Small businesses looking for fresh and relevant ways to serve up location-based deals and stay ahead of the curve have numerous options. The following examples highlight how small businesses can leverage verified checkins, barcode scanning technology, group buying initiatives, activity-based rewards, and opt-in lists for innovative and mobile-friendly location-based deals.
 
1. Verified Checkin Rewards
 

Most checkin apps are designed so that small businesses can set up specials or rewards for checkin activity. Few, however, can truly verify that an application user is exactly where they say they are. For the small business owner to truly benefit from offering checkin rewards, verification is critical.
 
SCVNGR is an example of a location-sharing service built with verification in mind. The startup, which seeks to serve as a game layer for the real world, has a QR code checkin feature; businesses can display QR code decals to encourage patrons to pull out their mobile phones and scan the QR code to check in to their venue. Since the scan is tied to a specific location, the checkin is valid.
 
In general, QR codes present a clean way to tie a customer's whereabouts to a physical location. Small businesses can choose to chuck the checkin app in favor of creating their own in-store QR code marketing initiatives -- think scan-activated coupon codes or discounts -- with the help of full-service QR code solutions such as ScanLife.
 
2. Social Barcodes
 

Small businesses sell products. Products have barcodes. New technology makes it easier than ever for consumers to create social experiences around products, and for retailers to reward them for their in-store scanning behaviors.
 
Bakodo is an iPhone app that can scan nearly all types of barcodes; consumers can use it to comparison shop, read reviews from friends, and make more informed purchase decisions. Stickybits has a mobile app that lets users create a social experience around products with photos, text, and videos. Even Shopkick, an automatic checkin service for retailers, has an iPhone app that supports barcode scanning activities.
 
As barcodes become more social in nature, small businesses have an opportunity to participate in product-driven communities and even reward consumers who scan in their stores. With Bakodo, for instance, small businesses can license a white label version of the technology to reward customers with discounts and coupons depending on what they scan.
 
3. Group Deals
 

Those following the group buying trend have no doubt noticed the growing buzz around Groupon and its many competitors. These deal-a-day sites allow small and local businesses to offer extreme discounts to new audiences. The formula has proven to appeal to customers looking for a deal, bring in new business, and create repeat business.
 
Interested small businesses can turn to services such as Groupon, LivingSocial, OpenTable, Yelp, or Zagat to help them facilitate a location-based deal. Better yet, there's now a handful of do-it-yourself, deal-a-day software options. With Wildfire, for instance, businesses can offer their own group deals via their website or Facebook Page.
 
Another new option perfect for neighborhood bars, restaurants and coffee shops is GroupTabs. The service blends group buying with checkins, so that when a certain number of people check-in at the same place at the same time, they can unlock a pre-defined venue deal or special. GroupTabs is brand new and available in limited markets, but it hopes to expand and is accepting business requests via email.
 
4. Challenge-Based Rewards
 

In addition to QR code checkins, the mobile location-based game SCVNGR now enables any retailer to offer custom rewards to patrons who accrue points for specific behaviors -- checking in, posting a photo, or completing a user-defined challenge -- at their store.
 
The rewards platform is more flexible than those offered by Foursquare and Gowalla, and allows small businesses to decide how many rewards to offer, how many points customers need to unlock a reward, and how many times the reward in question can be redeemed. Patrons can also only attempt one reward at a time and can visually track their progress via a green status bar.
 
SCVNGR also sends out signage, QR code decals, table tents, and coasters to participating businesses free of charge to help facilitate the in-store behaviors. As such, the platform is perfect for small businesses looking to offer their own location-based deals.
 
5. Opt-in Deals
 

New startup Bizzy is designed to be the go-between for small businesses interested in distribution for their hyper-local deals and residents hungry for deals in their neighborhood. The service is designed with the intention of eliminating the clutter of traditional e-mail marketing campaigns by presenting deals and offers only to interested parties on their own terms.
 
Because Bizzy is opt-in for businesses and shoppers, it creates an ideal platform where local businesses can list deals that consumers want to find. Members can use the service to create their Bizzy List -- a list of businesses they want to hear from -- for a daily stream of related events and offers. Bizzy business members can create, manage and track their deals, as well as personally engage with shoppers and build better opt-in lists.
 
Bizzy is accessible to consumers on the web, or via its iPhone, iPad and iPod Touch applications. Bizzy's only downside is that it's currently a beta service only available in Dallas, New York and San Francisco.
 
As location-based marketing continues to grow, there are more and more ways that small businesses can offer location-specific deals. Verified checkins, barcode scanning technology, group buying initiatives, activity-based rewards, and opt-in lists are just five new ways that small businesses can leverage location-based marketing for innovative and mobile-friendly location-based deals. Let us know how your small business is offering location-based deals in the comments below.
On the go? Find this and other OPEN Forum articles through your mobile phone or Blackberry® or through the new OPEN Forum App for iPhone® from American Express. Visit openforum.com/mobile.  
Image credit: Joseph Robertson, High Museum of Art 

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Starting with Linux-based OpenBTS, Range's new system works with a software-defined radio such as the Universal Software Radio Peripheral (USRP) to present a GSM air interface to any standard GSM cell phone, according to a report in NetworkWorld. No modification of the phone is required, and the service uses open source Asterisk VoIP software as the PBX to connect calls. The system behind it all is reportedly the size of a shoebox, and it requires just 50 watts of power to operate, making it very amenable to solar power or other off-grid energies. Performance is much like that of any other GSM base station, NetworkWorld reports, and the system is capable of using a wireless backhaul as well. Costs and power needs are within reach of even a small village, Range says.

Range has already shipped about 150 of its OpenBTS systems around the world, including to India, Africa, the South Pacific and Haiti after the earthquake. Currently, the system is being used to provide free cell service at the Burning Man festival in Nevada. Range, meanwhile, is expected to emerge from stealth mode later this month; until then, updates can be found on the OpenBTS blog. Social and mobile entrepreneurs: a functionall* innovation to get involved in early...?

Website: www.rangenetworks.com Contact: glenn@rangenetworks.com

Spotted by: NetworkWorld via Katherine Noyes

* No, that wasn't a typo ;-) Functionall is a trend defined by our sister-site trendwatching.com as follows: "The phenomenon of simple, small and/or cheap products and services designed for low(er)-income consumers in emerging markets, with cross-over appeal to consumers in mature consumer societies." Check out trendwatching.com's briefing for more examples.

Pricing Plans and Viral Acquisition for SaaS enterprises

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May 19

Other bloggers, most notably my partner David Skok, have written extensively about building a sales and marketing machine for a SaaS business.  This, in our Matrix view, is the true revolution enabled by SaaS — the ability to unseat the traditional enterprise sales process and its multi-year sales cycles, multi-year implementations, and direct enterprise sales forces for a more efficient sales and marketing machine, and an environment where the best ideas and products (and not necessarily the best salesman) wins.

I recently invested in a great fast-growing SaaS startup called Huddle.    Here I will lay out an element of their model that I think is working especially well, and one area of challenge for the business.

Scalable Pricing

SaaS enterprises have the blessing and the curse of thousands of niche opportunities.  These can be a blessing, because a focused audience combined with a willingness to pay (at some level) for the service creates lots of opportunities to build profitable, small-to-medium sized businesses.  The curse is whether or not that niche audience can grow into one large enough to allow the company to be a really significant standalone enterprise.

As a venture investor, it’s critical for me to determine the likelihood a company has of addressing a large enough market.  This is certainly for my benefit, but also for the entrepreneur: raising venture capital into your great small SaaS company that could profitably dominate it’s niche has a high likelihood of killing it.  (A hosted platform to run scheduling and billing for a dog walking business may in fact be a profitable enterprise, but not create a substantial return to outside investors.) As an entrepreneur I’ve built big venture-backed enterprises that couldn’t possibly have succeeded without capital and medium-sized successes that required just $100K in financing.  Both can be great, but it’s important to figure out which train you’re driving.

One element that separates the niche businesses from the ones with potential to be big standalone enterprises is the ability to scale the ASP across customer segments.  Many SaaS startups have pricing plans that mean they can rarely extract more than a few thousand dollars from a customer in a year.  These can be nice businesses, but it’s challenge to build a really big business, if you have to acquire millions of paying enterprises.

Of course, if you want to be able to earn six figures a year from your biggest customers, in the SaaS world you have to EARN it — there’s much less lock in, and commitment before trial, than in classic enterprise software.  I’ve seen a couple of ways people have done this successfully:

Scalable Pricing Attributes

A product that can be used on a workgroup scale initially, but expand to meet enterprise demands, and have a natural price escalation with it.  Huddle does this well.  You need broad enough appeal and value, as it will be hard to decouple your pricing entirely from the number of people using it.   Make sure that the attribute that triggers steps up the price ladder is (a) a rational thing to charge more for, and (b) something that has a very high upper bound.  Don’t charge per GB if big companies won’t use a 1000x the storage of small ones.

Your pricing is, in part, a function of your increasing costs, but also a function of your increasing value, and segmenting the customers who can afford to pay a lot from those who can’t.  JBoss was able to transform their business when they focused on putting the right scalable pricing model in place.  They ended up creating  a multi-dimensional scaling model that included things like number of servers, response time for support calls, number of named support people at their end, number of support locations, and which set of JBoss products they were using, in order to successfully get some customers to pay $1M while others were paying just $10K.

Money Flows

Get in the flow of money.  It is flat out easier to get paid a lot if you are sitting next to a big flow of money.  Investment banks do this in spades — just a few basis points adds up when millions of dollars are moving daily.  But some SaaS startups do this too:  Marin Software and Kenshoo build enterprise grade SEM platforms that substantially improve the performance of their customers campaigns.  And because these customers are spending $100K-$1MM a month on SEM, charging 2-3% seems reasonable, and can quickly scale to $100K+ ASPs.

It’s helpful to get this right in the beginning.  Day One, you feel lucky to have a customer, and are not worried about how you’ll get $100K+ out of WalMart someday.  But the prices you set and the dimensions on which you charge can prove sticky, and customers can be very resistant to price changes.  Try to implement a pricing structure that drives customers up a spending ladder as their usage/dependence on the product increases, rather than having to issue explicit price hikes.

Faster Adoption/Engagement

Huddle (like many SaaS startups) relies on filling customer funnel with customers using a free trial or paying a small monthly fee, and then utilizes inside sales to grow penetration and spend with these customers.

A key risk going forward is the ability to continue to stock the top of the funnel cost effectively to fuel the sales and marketing machine.  This is risky if you expect to grow your business quickly.  I think of these marketing channels to fill the funnel as veins of gold in the rock: you find one and mine it until it’s gone, and then go looking for another.  Some will be rich and lasting, others quickly exhausted.  Huddle had success in ways you do early, with the founders out evangelizing and touching customers directly.  Channels such as PR, partners/channel, affiliates, AdWords, SEO, podcasts, social media, inbound marketing can all be used and will have varying success depending on your product.  Most of these have been adopted to the business market from consumer web companies with great success.

One of the most compelling transplants from consumer marketing is viral marketing.  It’s a compelling goal for your business, both for its price (free!) and the great depth of the vein.  It could be valuable for spreading within an organization (growing penetration/spend), but even more so to bring new customers into the funnel.  However, few SaaS startups have driven significant adoption to date through viral means, and success has been much more common at the lower ticket, user-level adoption (almost consumer) SaaS business.  DropBox has spoken eloquently about getting viral religion, and is a great success story, but is largely a consumer product.  My partner David Skok has written a must-read reference piece on viral marketing.

Huddle has built a great online collaboration product that enables project management, document sharing, calendaring and a full suite of collaboration services to occur between enterprises (as opposed to Sharepoint, which is strictly behind the firewall).  The fact that the tool is for collaboration between enterprises presents an unusual opportunity to spread virally to new customers.  A PR agency managed their client interaction with Kia Motors using Huddle, who liked the product and mandated the tool globally for all their PR agency relationships.  If some of those agencies like the product, they will hopefully spread it on to other customers.  The same behavior happens internally within big customers such as Proctor & Gamble, where one workgroup will use it to coordinate a project, and others will adopt.  It will never be viral in the Zynga sense of the word — k factor >1 — but it will generate customers and qualified leads through the normal course of product use.

The challenge for Huddle is what David Skok refers to as “Viral Cycle Time”.  The software generates real productivity gains for workgroups upon adoption, as users abandon inefficient email exchanges for true collaboration.  But it can take months for the more recalcitrant team members to adopt the system, and until the whole team is on board the value of the product is diminished or undermined entirely.  The resistance would seem to be caused by the general inertia and ubiquity of using email, and resistance to learning something new.

A breakthrough in reducing the viral cycle time (implicitly linked to the rate of adoption by workgroups, which I think is gated by the rate of adoption of the slowest members of those groups) is essential for the company to realize its growth ambitions.  There are a number of steps recently taken or in the works to address this:

• Integrate more seamlessly into current workflows.  Extensions are available so you can save files directly from Excel or Word into your Huddle workgroup, for example.
• Reduce barriers to sharing by streamlining the process of inviting new people to a workgroup

However, for the company to grow revenue to the tens of millions, the product needs to spread more quickly within the customer (to turn team sized customers into enterprise customers) and bring new customers into the funnel.

Anybody have good lessons learned on how to do this?

Limeys

The Huddle team might ask you for “lessons learnt” instead, since the company was founded in London and a majority of the customers are still in the UK.  The business has a high profile in the London startup scene, but is just getting introduced here in the US.  One of the founders, Andy McLoughlin, has just taken up permanent residence in San Francisco, and with the new investment, the company is building out their US operations here.  Collaboration is a big market (Sharepoint sales >$1B) with a lot of competitors in various guises.  Huddle distinguished themselves from their competitors across a number of dimensions, including:

• Capability and passion of the founders and team rank as highly as the best teams we see coming out of silicon valley
• Focused on building collaboration suite from day one, not a temporary pivot from a filesharing or project planning business, which may be abandoned as quickly as the last idea
• True enterprise focus.  Working with and listening to the corporate and government CIOs to deliver the enterprise reliability and security they require for their sensitive data
• Metrics-driven marketing approach
• Focus on paying customers, not gaudy numbers of non-paying users.  They were reluctant to give me a free account because I didn’t put it in the term sheet.

The bar is definitely higher for me to do an investment in a foreign startup.  It certainly helps that I travel to London regularly for Betfair board meetings, but in this case, we found a company that cleared that high bar and are thrilled to be a part of building it.

For many users, one of the biggest pain points in owning an Android device can be the experience of buying a non-free mobile app from the Android Market.

Paypal might be stepping in to make that process significantly simpler.

The process currently requires a not insignificant amount of of time and patience because it involves using a Google Checkout account to seal the deal. If you don’t have a Google Checkout account already, you have to create one using a debit or credit card; a bank account alone isn’t sufficient. (Only T-Mobile users can bill their Android MarketAndroid Market

app purchases directly to their carrier.)

For a new AndroidAndroid

user, this is an inconvenient sticking point when trying to purchase a mobile app for the first time.

Bloomberg is now reporting that Paypal and GoogleGoogle

are in talks to suss out a better payment solution for Android device owners. These users “may be able to pay for apps with PayPal as soon as this year,” according to Bloomberg’s sources.

Paypal has become one of the more standard payment methods for online and mobile purchases over the past decade. In 2007, it was seven times larger than Google Checkout in terms of number of users, and currently, many e-commerce sites using Google Checkout and Paypal options still report significantly higher numbers for Paypal.

To put it bluntly, if more average smartphone users have Paypal accounts, using Paypal as the payment method for the Android Market would drastically reduce the friction inherent in the app purchasing process. Reducing friction means more apps will be sold. This means more developers will make more money, which means the Android platform will become more attractive to mobile developers overall. And that in turn would create a larger, more diverse Android Market that would stand a better chance of becoming truly competitive with the iTunes App StoreApp Store

.

In a word, Paypal in the Android Market would make the Android Market a better place, and quickly, too.

We’ve reached out to both Paypal and Google for comment or confirmation; we’ll update this post if we hear back from them. (Update: A Google representative told us that the company does not comment on rumor or speculation; we’ll have to wait and see if Bloomberg’s sources are correct.)

As a diehard Android user myself, I’d be happy to see a Paypal option for the Android Market.

Fandroids, do you think you’d buy more apps from the Market if Paypal were integrated for an easier checkout process? Let us know what you think in the comments.

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I have this conversation every day, so I decided I should do a (long) blog post on it…

To use Chargify, you need to have a Merchant Account and a Payment Gateway.

Most people don’t know what these things are or how to get them, because most people never need to know what these things are until they have a business and they want to accept credit card payments from customers.

As long as this is, I tried not to go into every detail, but it should suffice for most developers and business folks who just want to know what they need.

WATER SYSTEM ANALOGY

Imagine the outdoor watering system for your typical suburban home…

1. You have a city water supply that provides water to the homes on your street.
2. You have have a pipe that connects your house to the city water pipe under your street.
3. You have a set of water valves that control flow to your grass & plants. Older valves are opened & closed manually. Newer valves are operated electrically.
4. If your sprinkler valves are electric, then you have a control box that you can program to open & close the valves on a schedule, changing the schedule for the season, giving more water to some plants and less to others, etc. And really new systems have sensers for sunlight, temperature, and moisture, so they can water exactly the right amounts at the right times and still save water.
5. At the end of the system, you have sprinklers and other devices that provide water directly to grass and plants.

With that as a rough analogy and visualization, here’s how credit card processing works for your business…

WATER SUPPLY –> CREDIT CARD PROCESSING NETWORK

The water supply is the credit card processing network… all the banks and computer networks that process transactions. The big players in this system are Visa, MasterCard, and the card-issuing banks, which actually provide credit cards to customers.

Water flows one way in this analogy and that’s fine for purposes of illustration. Most of the time, when it comes to credit cards, money should be flowing from your customers to your business.

But the network really is two-way. Money does occasionally flow back to customers: when you issue a refund to someone or, worse yet, if your customer does a “charge-back” (this is when they call their credit card bank and say they’re not satisfied with your service, so the bank yanks the money out of your bank account, plus an additional charge-back fee that’s usually around $30).

Charge-backs are bad. The fees can add up very quickly, and you’ll be cut off from the credit card network if your business generates more than a few charge-backs per year. The best way to avoid them is to run a good business and provide your customers with many ways to contact you if they don’t understand a charge on their credit card statement. Make sure the info that appears on their statement includes a web address or telephone number (more on this in the next section).

Imagine if you were pushing dirty water back into your city’s water supply. They’d cut you off pretty quickly!

PIPE TO YOUR HOUSE –> MERCHANT ACCOUNT

The pipe to your house is your “Merchant Account”. Think of your Merchant Account as your “node” on the credit card processing network that spans the world. It’s a bank account, but it’s a pretty unusual bank account. You cannot access it directly like a regular checking or savings account, but it links to one of your regular bank accounts…

Charges & refunds that are processed through your Merchant Account will be deposited into or taken out of a bank account that you specify (probably your main business checking account).

Most banks large and small can provide Merchant Accounts. You can get a Merchant Account by walking into Wells Fargo, Bank of America, Barclays Bank, Bank of Australia, etc. Or you can contact a broker who will help you get the best Merchant Account for your business.

It usually takes 1-3 weeks to get approved for a Merchant Account. The bank needs to check your credit and consider the kind of business you’re operating before they give you a Merchant Account. Why? Because dealing with credit cards is a touchy issue and everyone wants to protect the whole system from abuse, so they need to know something about the merchants who are charging customer’ cards.

The bank is literally giving you, the merchant, credit: you’ll get paid within a few days after a customer makes a purchase, but the customer can ask the bank for his money back months later. What if you’ve gone out of business and the bank can’t get the money back from you? That’s credit risk. That’s why the Merchant Account bank must charge a “discount rate” on every transaction, usually between 2-4% plus a flat fee of, say, 30 cents. There is usually a monthly minimum of, say, $30/month. The more risky the type of business, the higher the fees will be.

I mentioned charge-backs in the prior section. The only note I want to add is this: when you set up your Merchant Account, you’ll be asked for the business name as you want it to appear on customers’ credit card statements. Be sure the business name is something they’ll recognize, and better yet, make sure it includes a web address or telephone number. That makes it really easy for customers to contact you if they’re confused about a charge, and therefore much less likely to do a charge-back!

Note about Countries…

Your customers can be anywhere. It’s where your bank is located that matters below…

Your Merchant Account will be linked to your regular business bank account, wherever that may be. For the most part, your Merchant Account needs to be in the same country as your regular business bank accounts. It’s rare that banks or governments will allow these to be in separate countries, but…

We have seen examples of Dutch and German merchants getting Merchant Accounts at Barclays Bank in the UK. This makes sense, since all three countries are in the EU. I don’t know how much of this is allowed, but it seems logical.

WATER VALVES –> PAYMENT GATEWAY

The water valves are your “Payment Gateway”, which allows you to access your Merchant Account. Remember, your Merchant Account is a bank account that you cannot directly access. Your Payment Gateway is your interface.

The Payment Gateway allows you to process charges and refunds to your customers. It also provides services like fraud prevention (through card billing address verification) and secure storage of credit card data.

And just like physical water valves, you *can* operate your Payment Gateway manually. You can log into it via the web and process charges & refunds. If transactions were declined, you can view a history and see what error messages, if any, came back from the credit card network. Some Payment Gateways have simple features to handle recurring billing, too, but because their business focus is not recurring billing, they don’t have the breadth or depth of a service like Chargify. Of course, they *do* have breadth & depth in the processing of charges & refunds, fraud prevention, secure data storage, etc.

The Payment Gateway usually charges 5-10 cents per transaction, plus perhaps a monthly fee or minimum of $20-30/month. There are also usually extra fees for fraud prevention (like 5 cents per address verification) and $20/month for secure data storage.

Note about Countries…

Your customers can be anywhere. It’s where your Merchant Account is located that matters below…

Payment Gateways only work with Merchant Accounts in specific countries. Here are a few examples:

For Merchant Accounts in the USA: Authorize.Net, TrustCommerce

For Merchant Accounts in Canada: Beanstream

For Merchant Accounts in the UK, Australia, and New Zealand: Payment Express

(FYI, Braintree & VersaPay gateways will be added later this summer)

CONTROL BOX –> CHARGIFY

The sexiest part of the water system analogy is, of course, the Control Box . It builds upon all the other resources to do truly cool stuff, like only watering on certain days, only watering if the ground is not already wet, and allowing you to interface with it from your office computer.

Of course, Chargify does a lot more than a sprinkler control box.

Chargify allows you to define all of your products & pricing, then bill for flat-rate and metered-rate plans, do “iTunes style” billing, do software license/seat billing, automatically prorate when customers change plans, accept discount coupons from your customers, etc.

It allows you to track your signups & revenue on your iPhone. It emails your customers if their card is declined and points them to a web form to update their card info. And many other wonderful things .

The point is, Chargify builds on the existing systems to add a whole new layer of functionality, and that new layer gets better over time. We’re working on new features and expanding our technology and business to better suit the needs of a growing list of merchants – over 1,600 as I write this.

You’ll pay Chargify $0 as you grow their business, then bump up to $50/month when you reach 50 paying customers, etc.

GREEN GRASS –> YOUR BANK ACCOUNT

When things work properly, money from your customers flows into your bank account, much like water onto your lush, green grass.

HOW TO GET STARTED

• You can go through a broker that handles everything. Brokers can usually get you better pricing and they typically know which Merchant Account banks will be friendly to your type of business. Check the Chargify page on Merchant Accounts. TransFS is an automated broker, much like LendingTree for mortgages… they take your application and submit it to multiple Merchant Account banks. I’m not sure if TransFS will also get you set up with a Payment Gateway, but I think they do. Millennium Bankcard is a human-powered broker, much like a real estate broker… they take your application and push the process through until you’ve got your Merchant Account and Payment Gateway.
• You can walk into your favorite bank and ask about a Merchant Account. Most banks will be happy to sell you one, and they’ll help you get set up with a Payment Gateway, too. Just make sure they give you a Payment Gateway that works with Chargify.
• You can also contact any of the Payment Gateways directly and most of them will be happy to help you find a bank for your Merchant Account, too, or they may even resell Merchant Accounts themselves.

SUMMARY

This is a long post and it may seem that there’s a lot to know, but getting your Merchant Account and Payment Gateway are actually pretty easy.

Plan on waiting about 2 weeks and then be delighted if it gets done sooner. I’ve seen it as short as 3 days (USA) and as long as 6 weeks (UK).

If you have decent credit and can put up with a bit of paperwork, it’s really not that bad. If you want to save time and potential hassles, use a broker. I’ve also heard good things about Wells Fargo, but in general, large banks seem to take a bit longer to work with, especially if you’re starting a new business.

It does cost money to have this structure in place. You’ll pay a minimum of $70-100/month for your Merchant Account & Payment Gateway, and then $50/month when you reach the first paid tier at Chargify. So you need to generate enough profit to keep your grass green after paying these expenses, or you need to plan to cover the bill for these things until your business generates enough revenue.

I hope this helps!

I really do like seeing new merchants get started every day in every different business, in every different part of the world.

I’ll update this as it becomes clear what needs clarification.

At least Mark Zuckerberg wrote a few lines of computer code at Harvard before he left to launch Facebook. Now Andrew Mason, a relaxed and lanky 29-year-old music major from Northwestern, has managed to build the fastest-growing company in Web history. Groupon represents what the dot-com boom was supposed to be all about: huge sales, easy profits and solid connection between bricks-and-mortar retailers and online consumers.

Groupon, a name that blends "group" and "coupon," presents an online audience with deep discounts on a product or service. Act now, says the pitch: You have only so many hours before this offer expires. That's a familiar come-on, but it's coupled with a novel element: You get the deal only if a certain number of fellow citizens buy the same thing on the same day. It's a cents-off coupon married to a Friday-after-Thanksgiving shopping frenzy.

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What's in it for the vendor--which might be a museum, a yoga studio or an ice cream shop? Exposure. Since the resulting revenue is not only discounted but shared (typically, 50/50) with Groupon, the vendor may scarcely break even on the incremental sales. But it now has customers who might never have thought of patronizing the business. Groupon gets its offers in front of eyeballs by buying ad space through Google ( GOOG - news - people ) and Facebook and via the word of mouth of its 13 million subscribers.

Video: Growing Groupon

Unlike so many dot-com rockets, Groupon is a real business. Occupying 85,000 square feet inside a rehabbed eight-story former Montgomery Ward warehouse in Chicago's River North neighborhood, the company is on track to pass $500 million in revenue this year, according to a report Morgan Stanley ( MS - news - people ) put together to win some underwriting business. No technology stalwart--including Ebay, Amazon.com ( AMZN - news - people ), Yahoo ( YHOO - news - people ), AOL and Google--grew that big that fast. At just 17 months old this April Groupon boasted a $1.35 billion valuation when it raised $135 million, the biggest chunk of it from Digital Sky Technologies, the curious Moscow investment fund behind Facebook and Zynga. (Mason will not disclose his stake, which he says is less than 50%.) The only company to reach a $1 billion valuation faster was YouTube (now part of Google), founded in 2005 and still waiting to turn its first profit. Groupon broke into the black just seven months after inception.

Mason's model is transforming the way companies--especially smaller ones with limited marketing budgets--snag sales. In May Groupon sold 6,561 tickets to a King Tut exhibit in New York's Times Square for $18 apiece, little more than half the list price. The campaign brought in $120,000 at virtually no marginal cost to the exhibit; Groupon pocketed about 50% for a day's effort. The most popular item so far: a $25 ticket for a Chicago architectural boat tour sold for $12. In May Groupon moved 19,822 tickets in eight hours and split the $238,000 with the tour operator.

Groupon has charged into 88 U.S. cities and 22 countries, including Turkey and Chile. Hundreds of rivals, some with deep pockets, are springing up. With turf wars brewing from New York to Brazil, Mason has armed himself with 250 salespeople and 70 writers, many plucked from the Chicago improv scene, to concoct witty pitches for deals. "We want to do for local e-commerce what Amazon did for normal consumer goods," he boasts.

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great deals, look around your city, in austin texas,www.morgansdea​ls.com offers local deals

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Mason's no Silicon Valley geek. He grew up in suburban Pittsburgh, where his father hawked diamonds and his mom worked as a photographer. Music, not computers, was his passion, starting with piano lessons at age 6. At Northwestern Mason helmed a rock band that he describes as equal parts punk, the Beatles and Cat Stevens. "I thought I was going to be a rock musician until I was 25 or so," he says. "But it wasn't about being a rock star; it was about being part of a counterculture."

Mason's entrepreneurial instincts were already stirring. At age 15 he delivered fresh bagels purchased from a bakery to his neighbors' front porches on Saturday mornings. (Candy bars, bought at Costco ( COST - news - people ), proved a better seller.) After college Mason, a self-taught computer programmer, landed a coding gig at InnerWorkings ( INWK - news - people ), a Chicago firm that farms out companies' printing jobs to the lowest bidder. There he hatched an idea for a website that would examine thorny topics, such as the Iraq war and health care, by unveiling the hidden agendas of the authors behind popular articles. Mason found support in 2006 at the University of Chicago, which granted him a scholarship toward a master's degree in public policy. A few months later Eric Lefkofsky, InnerWorkings' founder, caught whiff of Mason's plans and offered him $1 million of angel capital to crank up the hidden-agenda site.

The idea soon morphed into ThePoint.com, an online platform for petitioners to muster support for all sorts of causes. ThePoint launched in November 2007 and drew national press attention for its users' zany campaigns. One amassed 1,000 people committed to donating millions of dollars toward solving Africa's aids epidemic--on the condition that u2 front man Bono would retire from public life. Another corralled several thousand supporters of building a dome over Chicago to keep the city warm all year. The publicity helped lure $4.8 million in venture capital from the likes of Sand Hill Road's NEA. "I figured it was just a matter of time before I had my $400 million company and got my big payout," quips Mason.

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