Offering package deals to business customers

[SIU]

I hope someone can help. I am setting up a new online retail business with products aimed at consumers and businesses. With both sectors, there is an app that lets you manage the product and as well as view and manage the data the product picks up. The free version of the app has limited functionality and the premium that offers a lot of additional features.

I would like to create a package for businesses that are buying 10+ products. This package will contain the product plus the premium version of the app for, say, £30 a month but the commitment must be for 12 months. After this time, the product will be paid in full and the customer, after having access to the premium features for a year, can then decide if they wish to continue with the premium app at £10 a month or to move onto the free version of the app.

The intention is to subsidise this deal rather than make money on interest. For example, the product is £300 and the premium app is £120 a year so total would be £420. Purchasing the package deal is £360. I suppose this is not dissimilar to phone packages where you are tied into a fixed term contract.

I couldn’t find anything on the FCA website but am I right in thinking that this would constitute offering credit services to businesses and that either I am licenced or I need to go through someone like Hitachi. If the latter, I would need to increase my price to cover the additional charges and that’s assuming I can find someone that isn’t looking for a T/O of £1m+.

Can anyone give me advice on how this could work?

 

[Mr D]

You would be too small for the credit companies.
Are you willing to offer the credit yourself even with the hoops to jump through?

Or can you simply offer a discount - which your business can of course get away with in normal business operation - on the total package? No credit needed.

 

[japancool]

It's not providing credit. It's just a fixed-term contract.

 

[SIU]

Thank you Mr D and Japancool. I very naively assumed this was credit and it fell under the FCA. Thank you for confirming that I can just draft up a contract where they pay over a 12 month period in instalments - so much simpler

 

[JEREMY HAWKE]

Do you really need to offer credit just get them to pay for it when purchased .

 

[SIU]

The above figures was just an example, it will be a larger payment upfront (to cover the cost of the unit) and a lower monthly cost for 12 months. The idea is to sell the value of the premium app package which we hope they will continue to pay for after the 12 months is over. There will also be a separate bulk purchase discount, the monthly payment spread is only if the customer decides to go for the premium version of the app. Hope this makes sense