When a customer decides to purchase a product or service from your company, he or she has decided that the value of your product or service outweighs the cost. The ability to offer financing often changes the equation for customers on the fence, and it can result in more customers purchasing from your company. These additional purchases increase the profit of your business. This article will detail some additional underlying benefits of offering financing to customers.
Payment Flexibility and Credit for Customers
With financing, one benefit is that you might be able to offer better terms to customers than they would have if they were paying upfront. Customers can pay in small amounts over time instead of having to pay a large lump sum immediately with cash. Sometimes customers contribute to rebuilding their credit with these payments as well. However, as the business owner, you would still receive the payment 100% upfront.
Average Order Value Increases
Another benefit of financing is that the average order value of your customers may increase. With the ability to extend payment over 12 or 18 months, you are giving the customer additional purchasing power that can lead to larger purchases. Also, certain financing offers, such as no interest financing if paid within 12 months, can be a marketing tactic to increase purchase size. One study showed that offering financing on average would result in a 15% increase in average order value and a 17% increase in incremental sales.
Increase Customer Base
Financing options can also increase the number of customers for your business. More customers will be able to afford your products and services with financing. Because more customers can afford your products and services, you will have more options to market your products and may be able to reduce the cost of marketing. Also, some customers will only do business with companies that offer financing, so you will not be losing out to the competition based on financing availability.
Improve Customer Loyalty
There are always ways to improve customer loyalty. Offering financing to customers shows some element of trust because you are not requiring full payment upfront. Your customers may show more loyalty to your business because you are showing trust for them. Also, customers know that they are already approved for financing, so they will be much more likely to return to your business than go through the financing approval process at a competitor.
Overall, there are many benefits to offering financing to customers. Analyzing your product and service offerings to determine how you would like to offer financing is a smart choice. Home improvement contractors and recreation dealers have excellent options for offering financing at Medallion Bank. If you own such a business, please contact Medallion Bank with any questions or to start the process of offering customer financing.